In an unexpected turn of events, and a bit like an early Christmas gift, the Bundestag approved the Federal Government’s initiative to implement various regulations for the digital financial market on Wednesday, 18 December 2024. The Gesetz zur Digitalisierung des Finanzmarkts (FinmadiG) includes, among other things, provisions to implement MiCAR and DORA in Germany. The law aims to secure Germany’s leading position—or at least maintain it—in this domain.
Table of Contents
1. Objectives of the FinmadiG
A core element of the regulation is the creation of a new law for supervising crypto-asset markets: the Crypto Markets Supervision Act (Kryptomärkteaufsichtsgesetz – KMAG).
Additionally, several other laws are being amended. According to the explanatory memorandum of the legislation, aligning German law with the EU Regulation 2023/1114 is aimed at opening the European market to German providers and leveraging Germany’s extensive experience in crypto regulation to realise location advantages for new market entrants. This includes adjusting the responsibilities and powers of BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) and enforcing penalties for breaches of the EU regulation.
2. Key Provisions
a) Crypto Assets and Anti-Money Laundering
The EU Regulation 2023/1113 extends existing European rules on combating financial crime, money laundering, and terrorist financing to include crypto-asset transfers.
Service providers in the crypto sector will now be required to collect, transmit, and make available information about the senders and recipients of crypto transfers, similar to bank transfers, to ensure traceability. This replaces Germany’s national crypto-asset transfer ordinance with directly applicable European regulations.
Adaptations to the regulation on the transfer of funds (Geldtransferverordnung) and German Anti-Money Laundering Act (Geldwäschegesetz – GwG):
- Introduction of stricter due diligence requirements for transfers involving self-hosted addresses (§ 15a GwG n.F.).
- Inclusion of crypto-asset service providers and issuers of asset-referenced tokens as obligated entities (§ 2 Abs. 1 Nr. 2 GwG n.F.).
- Specification of cross-border compliance obligations for crypto providers (§ 15 Abs. 7 GwG n.F.).
- BaFin’s supervisory role over crypto service providers is defined (§ 51 Abs. 2a GwG n.F.).
b) Crypto Markets Supervision Act (KMAG)
The KMAG is introduced to implement the MiCA Regulation (EU 2023/1114) to extent required. Although the regulation sets direct material requirements, KMAG complements it by clarifying oversight responsibilities and enforcement mechanisms in Germany.
While MiCAR already establishes core directives as an EU regulation, KMAG provides additional national regulations, such as defining the authorities’ responsibilities and penalties.
c) Digital Operational Resilience in the Financial Sector
The DORA regulation (EU Regulation 2022/2554), which primarily applies directly in EU Member States, also necessitates minor adjustments in German laws.
Key updates include:
- Inclusion of DORA guidelines in audit regulations for annual financial statements.
- Redefinition of the status of certain institutions under the KWG: Instutions that were not yet directly addressed by DORA (such as leasing companies or factoring companies) are treated as if they were ‘financial entities’, equating them to financial entities governed directly by DORA.
- Simplified risk management requirements apply to smaller KWG-institutions, with exemptions from strict testing obligations like TLPT and the omission of specific IT third-party risk management rules.
3. Effective Date, Transitional Provisions, and Outlook
Provisions affecting issuers of asset-referenced tokens retroactively take effect from 1 July 2024, while other amendments come into force on 30 December 2024. No transitional provisions are foreseen.
