NFTs not to be classified as a security in Germany

NFTs not to be classified as a security in Germany

written by John Murphy | March 10, 2023

The German Federal Financial Supervisory Authority (BaFin) has declared that NFTs will not be classified as a security in Germany

BaFin also has a journal in which they release their contemporary supervisory issues and also share announcements if there comes anything new. Recently on March 8, they released an explanation of where NFTs stand in Germany legally.

According to that report, the BaFin has said that NFTs cant is classified as security yet. However, they are considering classifying it based on a case-to-case basis.

For instance, one may consider them as security, if almost 1000 NFTs have similar repayment and interest claims. Also, an NFT that provides proof of ownership or exploitation rights, like a guarantee of distribution can make it a good investment.

Reasons why NFTs are not classified as security?

BaFin has decided to classify NFTs as crypto assets based on their features. But as they are not quickly exchangeable so they can’t be considered crypto assets. in addition due to the lack of standardization, they can’t even be regarded as e-money. Bafin thinks that NFTs also don’t require a Payment Supervision Act License.

NFTs are exempt from BaFin’s anti-money laundering regulations, except for fungibles, which are financial instruments. However, NFTs individually classified as “crypto assets” must follow the AML rules.

A survey came out on the metaverse site of NFT collectors on Metajuice. It found that 3 out of 4 people buy NFTs for status, uniqueness, and aesthetics, rather than reselling. Only 13% of people claimed that they buy NFTs with the intent of selling them again.

Association between BaFin and Cryptocurrencies

BaFin is the German Federal Financial Supervisory Authority. It is a regulatory authority that oversees the regulation of separate bodies. Like the Country’s banks, financial markets, and insurance companies. It also regulates bitcoin businesses or any other cryptocurrencies. They are involved in legally classifying the crypto based on their use n the industry. Other than that they also issue ‘crypto custody licenses’ needed for Bitcoin-related matters in Germany.

Even the Exec Director of BaFin has backed proper and consistent regulation of the DeFi (decentralized Finance) sector in the European Union EU. Unlike the United States, Singapore, and India, Germany has a bit different approach to the regulation of NFTs.

The United States Internal Tax Agency (IRS) is responsible for collecting taxes. For tax purposes, they changed the language around NFTs to classify them as digital assets