The German Federal Financial Supervisory Authority (BaFin) has closed down the operations of UK cryptocurrency exchange Finatex Ltd.
It appears that the UK firm was ordered to “cease cross-border proprietary trading immediately,” for slipping under Germany’s regulatory wire, having not received the necessary authorization to operate cross-border exchange transactions from BaFin. The UK company which was launched in Leeds, Yorkshire in 2016 has announced it plans to dissolve the company this week as a result.
This is not the first time that BaFin has stepped in to flex its regulatory muscles in recent months over the question of cryptocurrency exchanges’ rights to operate. The last attempt to prosecute a company trading Bitcoin operating without a license was, however, unsuccessful after The Berlin Court of Appeal overturned the case.
Inconsistencies in the way cryptocurrency firms can operate cross-border transactions in Europe have caused some concern recently, and the German case once again brought these to the notice of European financial regulators. Although individual EU countries have clearly defined rules in their own jurisdictions for the trading of Bitcoin and other digital currencies, the EU as a whole has so far failed to come together with a Europe-wide regulatory framework. The EU passed a motion in 2016 enabling taxation of cryptocurrency holdings, investments, and profits.
Now that the Berlin Court of Appeals has classified Bitcoin as a “financial instrument” it now comes under the auspices of BaFin’s financial regulatory practices. Its CEO Felix Hufeld only last month told investors that they should avoid ICOs due to scamming concerns. He argued:
“We do not want to stifle innovation, but must avert dangers at the same time. For example, it is important for us to take action against money laundering and safeguard the privacy rights of investors. In addition, there should be certain minimum standards for the underlying terms of the contract.”
Earlier this year, the German Federal Government stated that cryptocurrencies do not pose a threat to financial stability. The government stated on 12 June that the volume of cryptocurrencies, when juxtaposed to the overall size of the German financial system, is comparatively low and, therefore, simply needs careful monitoring and regulatory measures put in place in order to control the space.
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