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The German Blockchain Community is pleased: after all, the Berlin KG 4. Strafsenat (punitive senate) confirmed the acquittal for the operator of a Bitcoin marketplace and decided that the assessment of the BAFIN Bitcoin as a unit of account – a subclass of the financial instruments – was not correct. The Strafsenat ruled that the BAFIN did not have to measure its interference in criminal law legislation. We take a more differentiated view.

In 2013, a German operator of a Bitcoin marketplace, BTC24 Ltd. based in Birmingham, had its bank account in Poland blocked by the Polish authorities on suspicion of money laundering. Commerzbank closed another account in Germany. On the recommendation of a lawyer, the operator finally shut down its Internet portal.

The Berlin managing director of BTC24 Ltd. was subsequently fined by the Berlin-Tiergarten District Court in spring 2016 for negligent conduct of illicit banking transactions or financial services. On his appeal, the judgment was reversed and the managing director was acquitted by the Berlin Regional Court at the end of 2017. The ruling of the Berlin Appellate Court of 25 September 2019 (AZ (4) 161 Ss 28/18 (35/18)) now confirms the acquittal in the third instance.

In its ruling, the 4th Criminal Senate of the Berlin Court of Appeal found that the Federal Financial Supervisory Authority (BaFin) disregarded the principle of separation of powers enshrined in Article 20 (2) sentence 2 of the Basic Law and the principle “Nullum crimen, nulla poena sine lege” (“no crime, no punishment without law”) under Article 103 (2) of the Basic Law.

Classification of crypto currencies as financial instruments

In 2013, BaFin defined the crypto currency Bitcoin (BTC) as a so-called unit of accounting and thus assigned it as a subclass of financial instruments. This classification subsequently formed the most important instrument for controlling the market of and with cryptocurrencies in Germany. Commercial services relating to cryptocurrencies (such as investment advice and brokerage, stock exchange activities, trading/brokerage, vending machines) require prior official approval due to this classification.

As a result, such services have not yet been available in Germany – with the exception of a few rare offerings.

Action taken without the permission required by BaFin can not only lead to a prohibition order but also threaten the entrepreneur with criminal consequences of up to five years imprisonment. This background gives the now issued ruling in criminal proceedings at three instances (Berlin-Tiergarten Local Court, Berlin Regional Court, Berlin Appellate Court) its special significance.

Findings of the Court of Appeal

The 4th Criminal Senate of the Supreme Court unequivocally states that the BaFin – insofar as it is of the opinion that Bitcoin is a complementary currency and thus a unit of account – fails to recognize that it is not the task of the federal authorities to intervene (in particular) in criminal law by shaping the law.

In its function as a requirement of certainty, Article 103 (2) of the Basic Law contains the obligation to clarify essential questions of criminal liability or impunity in the democratic-parliamentary decision-making process. In this context, the preconditions for criminal liability must also be described in such a concrete way that the scope and scope of the offenses can be identified and can be determined by interpretation. The authoritative task of the legislative power was to draft the wording of the criminal provision in such a way that the norm addressee could, as a rule, already predict on the basis of the wording of the statutory provision whether the conduct was punishable or not, taking into account the requirement of certainty.

The authority granted to BaFin, in the interest of general supervision of maladministration and preventive averting of danger, to issue incriminating administrative acts (e.g. closure or cease and desist orders) does not, however, lead to any competence whatsoever to extend the scope of application of criminal law norms by broadening the requirements (here: for the existence of banking transactions or financial services subject to authorisation).

The principle of the separation of powers enshrined in Article 20 (2) sentence 2 of the Basic Law requires only the legislature to determine the conditions of criminal liability. Accordingly, the principle of separation of powers also prohibits leaving a decision on the punishability of an act to the executive power. Nor is it the task of the courts (judiciary) to close any loophole that may exist for the protection of consumers.

In summary, nothing is punishable according to the ruling handed down until it has been determined by the law setting authority that it is illegal.

What are the consequences of the (criminal) verdict?

Although the ruling has no direct effect on the classification of cryptocurrencies by the BaFin, the German Crypto community is pleased. After all, it has been demanding the opening of the German market for countless companies for years and has repeatedly warned against the threat of company migration and that German consumers would have to resort to foreign, questionable service providers. How BAFIN will react to this remains to be seen.

Our take on this:

In view of the high extent of fraud cases it is obvious that the German authorities can’t even cope with the classic money laundering cases. See Money laundering more than 20,000 suspicious cases accumulate at customs. We doubt that they would be able to fight crypto crime appropriately coming along with the ATM-businesses and so on.

Austria – i.e. a with regulatory authorities not qualifying bitcoins as financial instrument just experienced the bankruptcy and fraud case Cointed, the enterprise operated in Austria up to 100 Bitcoin teller machines and an online Bitcoin marketplace. In the meantime there are hundreds of injured investors who would have been spared an investment in this company with a more stringent approach by the FMA.
In view of the helplessness of the European authorities in connection with crimes in the cryptographic market, we welcome every barrier and hurdle to fraudulent activities.


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