tl;dr
Germany passed the Digitalization of Financial Markets Act (FinmadiG) to implement the European Union's Markets in Crypto-Assets (MiCA) regulation just in time before the deadlines. The new legislation replaces Germany's prior digital asset rules with MiCA and introduces the Supervision of Crypto Ma...
Germany passed the Digitalization of Financial Markets Act (FinmadiG) to implement the European Union's Markets in Crypto-Assets (MiCA) regulation just in time before the deadlines. The new legislation replaces Germany's prior digital asset rules with MiCA and introduces the Supervision of Crypto Markets Act (KMAG). MiCA regulates digital assets, issuers, and service providers, requiring licenses for offering services to EU citizens and establishing rules for different digital assets. The legislation also addresses the transition period from national to MiCA rules and the varying durations of this period across EU member states.
On December 18, German parliament passed the Digitalization of Financial Markets Act (Finanzmarktdigitalisierungsgesetz, or FinmadiG) to facilitate the implementation of the European Union’s Markets in Crypto-Assets (MiCA) regulation, which fully comes into force on December 30. The passage of FinmadiG will be a relief for digital asset players in Germany, who had been facing an anxious wait for the troubled government to pass legislation to begin the transition to MiCA. Fears of a delay arose due to the dramatic collapse of Chancellor Olaf Scholz’s three-party coalition government in November, which left the embattled chancellor leading a minority administration.
When it comes to MiCA, FinmadiG introduced the Supervision of Crypto Markets Act (KMAG), a piece of legislation that replaces Germany’s prior digital asset rules with the MiCA regulation. MiCA was designed to bring digital assets, issuers, and service providers under a broad regulatory framework. Requirements include CASPs, such as digital asset exchanges and wallet providers, needing to obtain a license from national regulators to offer services to EU citizens; new classifications for different digital assets, and rules specific to those assets; proof-of-funds requirements for stablecoin issuers; and the requirement for any company seeking to issue digital assets to publish a white paper containing information about the project, such as possible risks.
In terms of the handover from national to MiCA rules, the framework includes a “transitional regime” for CASPs that offered their services before December 30, 2024, granting them additional time to transition from compliance with the current regulatory framework to compliance with MiCA. However, MiCA also allows individual EU member states complete discretion not to apply this transitional regime or to reduce its duration in view of “fostering financial stability and investor protection.” This non-unified approach has resulted in countries reducing the transitional period in their jurisdiction to different lengths.
The European Securities and Markets Authority (ESMA), the EU’s top financial markets regulator and the body tasked with implementing MiCA, noted last week that the varying transition periods mean CASPs need to get new authorizations under MiCA sooner rather than later. “CASPs will face different transitional periods depending on the Member State or Member States in which they are active. For example, if a German CASP doesn’t have a new license by July 2025, they cannot operate in EU countries that have imposed a six month transition period,” explained ESMA.