Germany's New Financial Market Digitization Act Prepares for MiCAR Rollout

Germany Approves Financial Market Digitization Act

Recently, the German Bundestag passed the Financial Market Digitization Act (Finanzmarktdigitalisierungsgesetz or FinmadiG). This move is in direct response to requests from the industry aimed at putting regulations in place prior to the large-scale launch of the Market in Crypto-Assets Regulation (MiCAR) scheduled for December 30, 2023.

Implications of the FinmadiG Legislation

The FinmadiG not only focuses on cryptocurrency management and MiCAR but also extends its reach to various other EU laws, including the Digital Operational Resilience Act (DORA) and the Funds Transfer Regulation. This legislation marks a significant step towards a more organized approach to handling digital assets and ensures that Germany remains at the forefront of crypto regulations within Europe.

Introducing the Cryptocurrency Market Regulation Act (KMAG)

With the implementation of FinmadiG, a new framework known as the Cryptocurrency Market Regulation Act (KMAG) will emerge. This is set to replace Germany's old cryptocurrency regulations with those of MiCAR. Even though MiCAR is predominantly a regulation that does not inherently require local laws, it's essential in appointing the Federal Financial Supervisory Authority (BaFin) as the main regulatory body. Without this designation, BaFin would be unable to issue necessary licenses.

Operational Impact for EU Companies

With the new law in place, EU companies holding cryptocurrency licenses from other jurisdictions will now be able to operate within Germany. However, the legislation sets a limitation for German businesses, preventing them from extending their operations across the EU until similar licenses are obtained.

Transition Period for Companies

MiCAR has provisions for existing licensed companies to keep operating for a maximum of 18 months. The length of the transition period, however, varies according to jurisdictions. In light of Germany's recent legislation, this transition period has been set to one year.

Conclusion

The approval of the Financial Market Digitization Act by the German Bundestag represents a pivotal development in regulating the cryptocurrency market. As Germany embraces MiCAR and introduces KMAG, it highlights the importance of adaptive regulations in response to the rapidly evolving digital asset landscape, ensuring that both local and EU-wide businesses can operate efficiently.