A new bill proposed in the German Parliament has provisions to allow customers to store their Bitcoin other cryptocurrencies in German banks from 2020.
The bill will allow banks to treat cryptocurrency, just like any other traditional asset. Also, banks will enable transactions in cryptocurrency on their online banking platforms.
The adoption of cryptocurrency has increased over the years as people embrace its benefits like low cost and high-speed transactions. The problem of volatility of cryptocurrencies can be addressed by taking fiat currency out of the picture completely. If the manufacturer, seller, purchaser all use the same ecosystem for cryptocurrency transactions, then the need to check the price of Bitcoin against local currency will not exist. Banks have no option but to accept cryptocurrency if they want to stay relevant in the evolving financial world.
Sven Hildebrandt, Head of a consulting firm DLC, welcomed the move saying that Germany could play a pioneering role in the regulation of crypto-assets and could even become a crypto-heaven.
Banking Association BdB also backed the bill, saying that subjecting cryptocurrency to the same regulations as fiat currency would prevent money laundering and terrorist financing through cryptocurrency. As banks had experience in asset management, they would easily adapt to handling cryptocurrency.
Today’s criminals and terrorist organizations can transfer their ill-gotten wealth by converting it into digital currency, and at the receiver’s end, the digital currency is re-converted into fiat money. Cryptocurrency exchanges have implemented KYC norms for users, but many do not have the infrastructure to ensure the authenticity of documents submitted for fulfilling the KYC criteria. Banks have systems in place which will match each document submitted by a user with government data.
Banks also have access to the overall banking history of their customers. Thus, any customer who does not have a verifiable banking history comes in to deposit a large amount of cryptocurrency will raise red flags in banks. They also can check the authenticity and background of recipients of large international transfers as they have the technology to do so.
On the other hand, the bill has come under criticism from the Baden-Wuerttemberg consumer center. Financial expert Niels Nauhauser has said that banks and financial institutions have not completely understood how cryptocurrency works, and it may contaminate the other assets held in a client’s portfolio.
If banks allow storage of multiple cryptocurrencies, then there could be a problem as different cryptocurrencies are priced differently. For some, like bitcoin, the price is decided by the ratio of supply and demand, and in others, their value is tied to a physical asset like the US dollar, gold, etc. Check Bitcoin Price News to get the latest update of Bitcoin price.
If this bill is adopted, the next logical step would be to allow banks to offer financial products such as FDs, loans in Cryptocurrency.