Germany’s Federal Financial Supervisory Authority (BaFin) has called for common standards for regulating decentralized finance platforms (DeFi) for all European Union member states.
Birgit Rodolphe, executive director at the German Federal Financial Supervisory Authority, made the call to start regulating the DeFi market. The BaFin director suggested using Germany’s “cryptocurrency license” as a tool for universal regulation.
BaFin is the central supervisory authority for Germany’s financial sector. Its responsibility is to regulate banks, insurance firms and financial institutions, including cryptocurrency companies. BaFin is the issuer of the so-called “crypto custody licenses,” a permit required for firms wanting to provide cryptocurrency services within Germany.
BaFin’s executive director called for a regulatory framework to begin developing security for decentralized finance (DeFi), as the risks for users are only getting higher and there are simply no funds to protect deposits.
Rodolphe added that lending, insurance and other financial products beyond the traditional financial system should be subject to mandatory licensing and supervision. The head of BaFin urged regulators to set the legal framework for DeFi sector providers, stressing that the regulatory base must be the same throughout the eurozone. Only a single legal regulatory framework across the EU, according to Rodolphe, would prevent market fragmentation, as well as enable the use of all EU innovations.
The director of BaFin emphasized that the German “crypto custody license” has proven to be a suitable tool for regulating the DeFi market. At the moment, BaFin has already issued such a license to four providers, and the agency is still considering several applications from various financial institutions. By the way, among those awaiting approval is Commerzbank, the German banking giant.
The latest Global Crypto ranking shows Germany as the leader among crypto-friendly countries in Q1 2022, ahead of Singapore and El Salvador.
To recap, the digital euro is in development, and the ECB plans to release a central bank digital currency (CBDC) by 2026, while German savings banks plan to open cryptocurrency transactions to their customers this year.
