The crypto world is upside down due to bankruptcies of providers. Germany is increasing the protection of investors and thus also improving its attractiveness to Switzerland.
The German government is drawing consequences from the bankruptcies of crypto exchanges and crashes of cryptocurrencies over the past year.
Investors are to be better protected in the future when investing in digital currencies such as Bitcoin or Ethereum. This emerges from a response by the German Finance Ministry to a question from the FDP parliamentary group in the German Bundestag, which is exclusively available to the newspaper “Welt“.
Custody of assets
According to the report, the ministry wants to strengthen the rights of customers in crypto exchanges already in the so-called Future Financing Act, which it has drafted together with the German Ministry of Justice. The law will soon be introduced into the German cabinet.
In particular, it is about protecting assets in custody from access by crypto exchanges, it said.
Pioneer in digital currencies
Germany does not even want to wait for the slower EU. With MiCA (Markets in Crypto Assets), a regulation has already been developed at the European level, which is intended to improve the legal situation of crypto investors.
But the regulation is not expected to become legally effective for all market participants in the EU until later next year.
“In order to strengthen legal certainty in the insolvency of crypto custodians, crypto assets held in custody should remain beyond the reach of the crypto custodian’s general creditors even before the MiCA enters into force,” the German Finance Ministry wrote in its response to the liberal party.
Limit Wild West
“Institutions that operate the crypto custody business should also make provisions for this purpose to separate their own crypto assets from crypto assets held in custody. Accordingly, a new regulation in this regard is to be included in the German Banking Act with the Future Financing Act,” the statement added.
The turbulence in the crypto market last year also turned out to be so devastating for investors because investors’ shares deposited with custodians were not sufficiently secured against access by crypto exchanges.
In Germany, numerous investors were cheated out of their assets, for example, in the bankruptcy of Celsius Network. These had offered their services via the Berlin platform Bitwala (new name: Nuri) and were then affected by the passing on of the coins.
Crash of crypto guru
However, the crypto platform FTX, after getting into turmoil, still accessed the customer assets stored within and thus supported its sister company Alameda Research when the problems threatened to spread to it as well, as also reported by muula.ch.
FTX had previously built up a 32 billion dollars valuation within a few years and was custodian of billions in assets on behalf of clients. Sam Bankman-Fried, one of its two founders, quickly achieved crypto guru status.
Then, in early November, FTX Group collapsed within days and filed for creditor protection in the United States.
Germany wants to make itself more attractive as a financial center with new legislation, such as the Future Financing Act. It is intended to make it easier for citizens and companies to build up assets and access the capital market.
This attractiveness now also applies to the crypto sector and is likely to eclipse Switzerland in this regard.
In this regard, there are namely no major legislative projects to strengthen the Swiss financial center currently in the pipeline.
It is true that the Swiss Financial Market Supervisory Authority (Finma) regularly points out that the supervision acts in a technology-neutral manner. Therefore all regulations are also applied to the crypto world.
However, this alone shows how complex the whole thing is when it comes to the innovative fintech license, which allows the acceptance of funds of up to 100 million Swiss francs.
At crypto provider Swissborg, as muula.ch recently reported, clientele assets on the platform already stand at 680 million dollars. Still, the company is not a neo-bank.