Crypto adoption is poised on a knife-edge, with regulation and laws prepared to push it either way in a moment’s notice. So far, we have seen countries around the world take a rather tolerant stance towards the crypto world, allowing exchanges and payment providers to operate freely. But it looks as if the tide is beginning to turn.
On July 31st, German parliament passed a new bill that forces all private key custodians to apply for a certificate of regulation from the German Federal Financial Supervisory Authority (BaFin). This new bill doesn’t come into effect until January 1st 2020, but a number of companies are already taking action in the German market.
Obviously, exchanges and payment providers can apply for the regulation from now, meaning they will never face any issues. Existing companies have to notify the BaFin in writing before February 1st 2020 and they have until June 30th 2020 to apply for the license. Unfortunately for crypto exchanges, they must all have the BaFin stamp of approval before the new bill comes into effect on January 1st 2020, otherwise face the full wrath of the BaFin.
The BitPay Equation
Interestingly, the second the new bill was approved, BitPay, one of the world’s most popular crypto payment gateway service providers, pulled Germany from its list of supported countries. Now, when you dig below the surface and look into how BitPay works, it soon becomes very clear as to why it ceased operating in Germany. BitPay can’t give merchants their private keys because of how its service works. BitPay accepts the Bitcoin or Bitcoin Cash, converts it into fiat and then releases it into the merchant’s account. This means there are no private keys for the merchants to ever get hold of as they don’t touch the crypto, but BaFin won’t look too kindly upon this.
Sure, BitPay does have a prestigious BitLicense in New York, but this BaFin regulation is a whole new kettle of fish. BitPay will have to spend a lot of money in order to come up to BaFin standard and implement the features it needs in order to get the regulation, so for the time being it’s simpler to stop operating in the region.
Could This Spread Out of Germany and Across Europe?
Germany is a major European powerhouse, and it has a significant influence over European laws. This could work against other crypto payment providers in the sense that Germany could demand that Europe adopts the same bill or a more stringent one. Countries like Malta that already have laws in place that govern crypto exchanges and the whole crypto space would likely be exempt from a European law, but you cannot rule it out at this stage.
Will Anyone Else Be Closing Their Services?
At the moment, it’s still unclear as to exactly how the bill will change the crypto scene in Germany, owing to the fact it’s only a few days old. If BitPay is anything to go by, we could very well see other crypto payment gateway service providers slowly pulling their platforms from Germany in the coming months. This could lead to a lot of businesses not being able to accept cryptocurrencies as part of their business model, and this could really hurt Germany’s reputation in the business world. It’s still early days, but we’re likely to see centralized crypto payment gateways pulling out of Germany as 2019 comes to a close.
There Are Solutions
Thankfully, it’s not all doom and gloom for businesses that accept crypto in Germany. There are a number of ways to carry on accepting cryptocurrencies for goods and services. One solution that looks very promising is Particl.
Particl is a decentralized marketplace where merchants can create their own stores, advertise their products and services while customers can pay using the PART coin or other cryptocurrencies. The marketplace is entirely autonomous and user-owned, meaning that no central authority like BaFin can take them down because no company holds any private key on behalf of users.
This new way of conducting eCommerce, it ensures vendors, not the eCommerce platform, get all the benefits and profits from their sales, in return allowing them to lower their prices for their customers and gain a competitive edge. The Particl Marketplace protocol also makes any data leak impossible by design and keeps transacting information and identities only accessible to the actual parties involved.
This could be a stellar option to look into for businesses fearing a revenue stream being cut off due to regulation.
An alternative solution could be self-hosting your own crypto wallet. You can generate your own invoices and QR codes using software on a POS machine that link directly to your own crypto wallet. This is another excellent solution that puts merchants and business owners back in control, not to mention it also has the added benefit of not requiring a fee to be paid to a payment processor. BTCPay Server is a great example of this technology in action, being quick, easy and simple to set up. A number of top companies around the globe are already using BTCPay Server to power their crypto payments, meaning its a tried and tested solution.
This new German bill could very well wreak havoc in Germany and throughout Europe, so putting plans in place to hedge your bets against a total clampdown on crypto payment service providers would be smart. Particl is looking like it could be a silver bullet to hedge risk against a clampdown, and thanks to its decentralized nature, it’s certainly resistant to BaFin’s regulations. We could be looking at Germany leading the way in a cull of mass adoption on the European continent, but cryptocurrencies have always been resilient and it’s likely crypto will find a way to survive.