Germany’s Fund Location Act initially proposed in April has been implemented recently, which will bring in lots of funding from institutional investors. Also, Germany is looking into an alternative solution to CBDCs, which is in contrast to other countries in Europe which are in favor of a digital currency regulated by the Central bank.
What does this new law entail for Germany’s Crypto Industry?
Germany has taken quite some time to enforce a law concerning investing in Cryptos, after legalizing digital securities in December(2020) and encouraged trading on the blockchain. However, this law might prove to be very beneficial to the Crypto industry in Germany and also the German economy at large. Germany’s Fund Location Act’s main proposal is to let “Spezialfonds,” or special funds, invest as much as 20% of their portfolios in crypto. Special funds are sold with the help of investment companies and are generally owned by banks, along with being fairly valuable as proven by their performance in the last year. According to an estimate from Börsen Zeitung, the daily newspaper in, Germany this could lead to an investment of $415 billion into the Crypto Industry assuming these funds reserve 20% of their portfolio. This financial backing will encompass around 4000 such funds. This is going to bring a new wave of volatility to the special fund market.
This is Germany’s first step towards making big investments in Crypto, though it is still doubtful about it being a safe venture.
Germany Working on an Alternative to CBDCs
Germany is one of the few countries in Europe that is trying to develop an alternative solution to a CBDC(Central Bank Digital Currency). France has already worked on two joint CBDC projects, along with Ukraine and Sweden, who also have plans for a potential CBDC.
Germany’s Central Bank, Deutsche Bundesbank, has been one of the main proponents of a CBDC alternative with the help of blockchain technology. It carried out a project with the help of major banks like Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs, and Germany’s Finance Agency. According to the test, the platform relies on two software modules that connect the present payment system with digital ledger technology. The bank has also highlighted the efficacy of blockchain technology in making online transactions easier to manage.
Bundesbank is also not on board with a digital euro as it feels it is unnecessary and will require a lot more time to look into. Although the likelihood of Germany’s actions having an impact on the European Central bank’s resolution on issuing a digital currency is very low.
This conclusion of the Central bank of Germany may be a really smart move in the future, assuming CBDCs end up failing for some .It is interesting to see where this will lead Germany as it has the largest national economy in Europe.
DWAYNE D’CUNHA, WRITER ON MEDIUM.
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