German parliament passes Financial Market Digitalization Act

According to a report by Ledger Insights, the German parliament (Bundestag) has passed the "Financial Market Digitalization Act" (Finanzmarktdigitalisierungsgesetz or FinmadiG) this week. The parliament responded to industry demands to ensure legislation is in place before MiCAR comes into full effect on December 30th.

FinmadiG not only concerns cryptocurrencies and MiCAR, but also affects other EU laws such as DORA and the Funds Transfer Regulation. For MiCAR, it introduces the "Cryptocurrency Market Regulation Act" (KMAG), which replaces Germany's old cryptocurrency rules with MiCAR.

Technically, MiCAR is a regulation and therefore does not require local law. However, legislation is needed to designate BaFin as the regulatory authority, otherwise BaFin cannot issue licenses. This will allow EU companies with cryptocurrency licenses from other countries to operate in Germany, but German companies will not be able to operate in the EU.

In addition, MiCAR allows companies with existing licenses to continue operating for up to 18 months, with the transition period being decided by each jurisdiction. Germany's new legislation sets the transition period to one year.