One recent BaFin raid on operators of crypto ATMs has reignited the discussion about the legal risks in the crypto sector. In a large-scale operation, crypto ATMs that were operated without the required permit were confiscated throughout Germany.
According to BaFin, these machines, where users could exchange euros for cryptocurrencies such as Bitcoin and vice versa, violate the German Banking Act (KWG) and pose considerable risks, particularly in connection with money laundering.
The legal risks for providers
For providers of cryptocurrency services, especially operators of crypto ATMs, the legal hurdles are high. According to Section 32 German Banking Act Anyone who conducts proprietary trading or banking business on a commercial basis requires an explicit permit from BaFin. Failure to obtain such a permit will not only result in the closure of business activities, but can also lead to criminal consequences. The operators of the confiscated machines may now face charges of conducting banking business without authorization, which can be punished with prison sentences of up to five years.
The latest regulation by the European Union with the MiCAR regulation also points to further criminal liability risks. This regulation, which is due to come into force at the end of 2024, sets out strict requirements for providers of crypto asset services. In particular, compliance with due diligence obligations in the context of money laundering prevention will increasingly come into focus. In the future, providers will have to collect detailed information about the identity of their customers and report suspicious transactions. Failure to comply with these obligations will not only result in regulatory measures, but also criminal consequences.
In the interest of users: protection against an uncontrolled market
While this regulation entails high requirements from the provider’s perspective, from the user’s perspective it serves to protect consumers. The crypto market has experienced an immense boom in recent years, but this has also attracted criminal activities such as money laundering and fraud. Without sufficient regulation, users could easily become victims of fraud or lose their investments in unsafe or illegal projects.
In its press release, BaFin emphasizes that the licensing requirement is not only intended to protect the financial market, but also to protect users from the risk of total loss. The anonymity offered by cryptocurrencies makes them attractive for illegal activities, but also dangerous for unsuspecting investors. BaFin’s latest action underscores the need to establish clear rules and controls in this area in order to strengthen users’ trust in the financial market.
outlook
The closure of crypto ATMs by BaFin shows that the crypto market cannot operate outside the legal framework. Providers must be aware of the high regulatory requirements and strictly adhere to them in order to avoid legal consequences.
At the same time, it is in the interest of users that this market is regulated and controlled to protect them from the dangers of unregulated trading. At a time when cryptocurrencies are becoming increasingly important, compliance with legal requirements is not only a matter of legal compliance, but also of the protection and integrity of the entire financial system.
Latest articles by lawyer Jens Ferner (specialist lawyer for IT & criminal law) (Show all) Tags: accusation, fraud, Bitcoin, Bitcoin Cash, Chainlink, Dash, Ethereum, prison sentence, lawsuit, cryptocurrency, Litecoin, Monero, Ripple, duty of care, Tether, Zcash