In its September 25, 2018 judgement, the 4th Criminal Division of Berlin Court of Appeal ruled that Bitcoin trading is not punishable because Bitcoins are not a financial instrument within the meaning of the Banking Act. Bitcoin trading and operating a corresponding trading platform is therefore not subject to the BaFin obligation to obtain permits under Section 32(1) sentence 1 Banking Act.
The Court of Appeal judgement was issued in criminal proceedings against the operator of an online trading platform for Bitcoins. Berlin-Tiergarten Local Court had sentenced the operator to a fine for conducting banking business and for providing financial services without the required BaFin permit. Berlin Regional Court had reversed the criminal judgement, which was confirmed by the Berlin Court of Appeal judgement.
Berlin Court of Appeal holds that the application of the Banking Act is precluded by the fact that Bitcoins are not a financial instrument within the meaning of Section 1(11) Banking Act. In particular, Berlin Court of Appeal rejects the view of BaFin that Bitcoins are a complementary currency and thus units of account as a special form of financial instruments (BaFin information on financial instruments in accordance with Section 1(11) sentences 1 to 3 Banking Act as amended on July 26, 2018 under no. 2(b)(gg)). With this view, BaFin was inadmissibly extending the scope of criminal law by extending the requirements for the existence of banking transactions or financial services subject to authorization. Bitcoin is neither issued by a central bank nor by a public authority. Bitcoin lacks general recognition and predictable stability of value, that would allow for the use of Bitcoin to compare goods or services. Bitcoin thus fails to meet an essential requirement of units of account.
The final judgement of Berlin Court of Appeal provides legal clarity with respect to the obligation to obtain permits to trade in cryptocurrencies. At the same time, it remains to be seen when the legislator will use this ruling as an incentive to act – there is hardly any doubt left as to the "whether" of future legal regulations due to the growing importance of cryptocurrencies.
(Judgement of September 25, 2018 – Case: (4) 161 Ss28/18)