GERMANY Law and Practice Contributed by: Stephan D. Meyer, Lars Fidan, Elisa Otto and Christian Meisser, LEXR
10.2 Local Regulators’ Approach to Blockchain BaFin has taken a constructive but firm approach. Germany moved early: crypto custody under the KWG (2020), the eWpG (2021) and MiCA implementation via the FinmadiG (2024). The posture is innovation-friendly within clear bound - aries. BaFin does not champion blockchain but has systematically removed legal uncertainty for firms building within the framework. By the end of 2025, Germany had more MiCA-authorised CASPs than any other EU member state. Current areas of regulatory focus include stablecoin supervision under MiCA Titles III and IV, the treatment of DeFi protocols, standards for tokenised deposit instruments and AML controls for blockchain-based services. BaFin has also co-ordinated closely with ESMA on implementing MiCA’s market abuse provi - sions for crypto-asset markets. 10.3 Classification of Blockchain Assets Not all blockchain assets are treated as regulated financial instruments in Germany. The classification is determined on a case-by-case basis and is the criti - cal threshold question for determining the applicable rules. Security tokens that represent transferable securi - ties, such as tokenised shares, bonds or fund units, qualify as financial instruments under MiFID II and are regulated under the WpHG and eWpG. The full securities framework applies, including prospectus requirements, market abuse rules and MiFID II con - duct obligations. Crypto-assets that do not qualify as financial instru - ments fall under MiCA’s tripartite classification: asset-referenced tokens (ARTs) backed by a basket of assets, e-money tokens (EMTs) pegged to a single fiat currency and other crypto-assets including util - ity tokens. Each category carries distinct issuance, reserve and service provider requirements. BaFin determines the classification on a case-by-case basis. The boundary is not always intuitive: a token with profit participation rights or dividend-like features
Industry practice goes further. Common additions include performance guarantees with defined SLAs, liability and indemnification provisions tied to accu - racy and uptime, source code escrow arrangements, step-in rights in the event of provider failure, sub-out - sourcing restrictions and notification obligations, and benchmarking clauses. The overall trend is toward contracts that treat regtech providers less like soft - ware vendors and more like operational partners whose failure would directly affect the institution’s regulatory standing. 10. Blockchain 10.1 Use of Blockchain in the Financial Services Industry Traditional financial institutions in Germany are active - ly implementing blockchain technology across mul - tiple use cases. Deutsche Börse has developed a digital asset strategy including a crypto spot-trading platform for institutional clients. Several major banks have explored tokenised deposits, and DZ Bank and Commerzbank have issued digital bonds on DLT infra - structure. The German Electronic Securities Act (eWpG, 2021) was a landmark, enabling the issuance of electron - ic securities – including bonds and fund units – on distributed ledgers (crypto securities, Kryptowertpa- piere ). Originally limited to bearer bonds, the eWpG was extended to fund units in 2022 and, through the Zukunftsfinanzierungsgesetz (ZuFinG), to elec - tronic shares since November 2025. This legislation removed the requirement for a physical certificate and created a regulated framework for DLT-based securi - ties issuance within the existing securities law archi - tecture. BaFin maintains the crypto securities register for centrally registered electronic securities. The Bundesbank is actively participating in the Euro - system’s digital euro project, and Germany’s financial industry has been a strong advocate for ensuring that wholesale central bank money settlement remains available for tokenised securities transactions.
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