GERMANY Law and Practice Contributed by: Stephan D. Meyer, Lars Fidan, Elisa Otto and Christian Meisser, LEXR
The key is to design the distribution mechanism with the regulatory classification in mind from the outset, rather than fitting regulation around a structure that has already been built. 5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails Existing payment rails dominate: TARGET2 for whole - sale, SEPA for retail, card networks for point-of-sale and e-commerce. WERO, launched by the European Payments Initiative, is the most notable recent addi - tion for instant payments. New rails are not prohibited, but any service trans - ferring funds on behalf of third parties requires ZAG authorisation. The framework is technology-neutral in principle but licence-dependent in practice. Under MiCA, transfers of crypto-assets constitute a distinct service category. However, where crypto- asset transfers involve e-money tokens (EMTs) that function as means of payment, they may additionally fall within the scope of PSD2/ZAG, potentially requir - ing dual authorisation – a challenge that the EBA has addressed through transitional guidance. 5.2 Regulation of Cross-Border Payments and Remittances Cross-border payments require ZAG authorisation and compliance with the Transfer of Funds Regulation, which mandates complete payer and payee informa - tion for every transfer. For crypto-asset transfers, the recast regulation applies the Travel Rule without a minimum threshold. AML/CFT compliance is the dominant regulatory concern. BaFin and the Bundesbank actively moni - tor cross-border payment flows, and the obligations are tightening. PSD3/PSR will introduce mandatory verification-of-payee for all credit transfers, real-time fraud monitoring requirements and broader provider liability for authorised push-payment fraud. For payment service providers, cross-border compli - ance is becoming more technically demanding with
each regulatory cycle. Firms that invest in scalable compliance infrastructure now will be better posi - tioned than those that treat each new requirement as a standalone project. 6. Marketplaces, Exchanges and Trading Platforms 6.1 Permissible Trading Platforms Germany permits several types of trading platforms for financial instruments, each under a distinct regula - tory framework. Regulated markets ( Börsen ) are oper - ated under the German Exchange Act ( Börsengesetz , BörsG ) and supervised by the respective exchange supervisory authority of the relevant federal state. Multilateral Trading Facilities (MTFs) and Organised Trading Facilities (OTFs) operate under MiFID II as transposed by the BörsG and WpHG. For crypto-assets that do not qualify as financial instruments, trading platforms require CASP authori - sation under MiCA. MiCA-licensed platforms can passport their services across the EU. For tokenised financial instruments, the DLT Pilot Regime (discussed in 2.5 Regulatory Sandbox ) provides an additional pathway, allowing integrated trading and settlement on a single DLT-based platform – though uptake of this framework has been limited. 6.2 Regulation of Different Asset Classes The regulatory treatment of different asset classes in Germany follows a bifurcated model. The WpHG, WpIG, and BörsG govern financial instruments, includ - ing security tokens that qualify as transferable securi - ties under MiFID II. The German Electronic Securi - ties Act (eWpG) enables the issuance of electronic securities without a physical certificate (see 10.1 Use of Blockchain in the Financial Services Industry for detail), but these remain subject to the full securities regulation framework. Crypto-assets that do not qualify as financial instru - ments are regulated under MiCA, classified as ARTs, EMTs or other crypto-assets. The classification boundary can be nuanced and is assessed by BaFin on a case-by-case basis (see 10.3 Classification of Blockchain Assets for detail). This initial determina -
319 CHAMBERS.COM
Powered by FlippingBook