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20.07.2018 | KPMG Law Insights

Bitcoin, Ether & Co: Cryptocurrencies are changing the infrastructure of the financial market

Bitcoin, Ether & Co: Cryptocurrencies are changing the infrastructure of the financial market

Digital transformation in payment transactions on the rise through virtual currencies + Trust in processes must first grow + Purely electronic payment processes offer great transparency + Banks and central banks remain outside + Rules lacking so far

Payment with virtual means of payment is made according to the principle of a blockchain. This is a digital cash book in which transactions between parties are recorded and stored. More than 700 cryptocurrencies are already traded on the net – with an upward trend. Currently, for example, the European Central Bank is discussing an “ECB Coin” as an alternative to central bank money.

Who controls the processes?

However, trust in the new type of payment transaction must first grow. After all, the idea of an electronic currency that works only on the Net, without intermediaries such as banks or central banks, seems rather strange at first. Complete transparency leads to traceability of the entire transaction history and therefore scores points in questions of data protection and banking secrecy. Nevertheless, there are still some things to be clarified in terms of processes. For example, what rules take effect when the system is disrupted. And how the whole thing can be controlled. It is therefore conceivable that we will see so-called hybrid systems in practice in the future: Closed systems with control instances that can take corrective action when necessary.

Open questions regarding payment transactions

There is also still a need for clarification regarding the treatment of cryptocurrencies in payment transactions. This is because, in BaFin’s view, Bitcoin & Co. are not e-money, as there is no issuer that issues the means of payment while substantiating a claim against itself. According to BaFin, the mere use of Bitcoin is not an activity requiring a license. This includes both letting and paying in the virtual currency, as well as selling and buying your own or “created” Bitcoins. However, if certain circumstances arise, a permit requirement may be established.

Conclusion: However, it is relatively unlikely that the relatively new and detailed design of the financial market infrastructure will be fundamentally changed. It will therefore be necessary to create control instances and rules, but this contradicts the very idea of a purely electronic means of payment.

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kvonbusekist@kpmg-law.com

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