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7.12 Rather Enabling Environment
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It took some time to start perceiving Germany as a country attractive for cryptocurrency-related businesses. Bitcoin and other cryptocurrencies found it challenging to gain popularity in Germany as the Germans are widely known for their love for cash. The situation began to change when the German government started making legislative attempts to regulate the legal relations in the sphere of blockchain and cryptocurrencies.
In 2017-2018, Germany started to evolve into the new cryptocurrency center of the world. According to Deloitte, German blockchain projects rank fourth on the GitHub platform following China, the United States and Great Britain (1307 in total). The first of them emerged as early as 2008, while the local cryptocurrency community refers to Berlin as the center of blockchain development.
According to chain.de (as of April 9, 2018), there are currently 105 blockchain startups in Germany with 22% of them related to finance (payments, investments, insurance, etc.). 18 out of 105 startups have successfully executed ICOs (e.g. IOTA, Gnosis), 10 more are currently in the process, while 25 are preparing for ICOs. 55% of startups are located in Berlin.
Neutral Political Environment
German regulators are paying attention to cryptocurrencies and blockchains, but do not link the development of this technology with the development of the German economy. Opinions about cryptocurrencies differ: The Central Bank is critical to cryptocurrencies, while the Government and Banks are trying to use the advantages of blockchain.
The country has average level of consensus of political institutions concerning the importance of supporting the development of distributed ledger technologies and cryptocurrencies. And this consensus is neutral.
Rather Enabling Legal Environment
Regulatory Convergence Germany has no special comprehensive legislation that would regulate all areas of legal relations associated with blockchain projects and cryptocurrencies. Legal relations associated with blockchain projects and cryptocurrencies are assigned to the Ministry of Finance (general issues) and the Federal Financial Supervision Authority (BaFin), which plays an oversight role.
Despite the fact that political elites have different views on the issue, legislative acts in general contain no significant contradictions.
Definiteness of Legal Regulation Germany has no special comprehensive legislation. The regulation of many issues (the status of cryptocurrencies, taxation and mining) are settled in the Letter of the Ministry of Finance of February 27, 2018, that aimed. Some issues (incl. ICO) are regulated by analogy.
Stability of Legal Regulation The active process of special legal settlement of legal relations associated with blockchain projects and cryptocurrencies began in late 2017 and early 2018, but some issues still remain unsettled. Issues associated with cryptocurrency are being actively discussed in the Parliament and the Government, therefore we can expect a change in the legislation with regard to this issue in the near future.
Adequacy of Legal Regulation Issues related to cryptocurrencies and blockchain projects have received a very adequate and progressive regulation that takes peculiarities of the blockchain projects into account. Regulators do not seek to prohibit or restrict the development of blockchain and cryptocurrencies, but also they do not create the special and more favorable regime for cryptocurrencies and blockchain.
Situation with the Rule of Law The conditions of the legal regulation of blockchain and cryptocurrencies are favorable, and since the values of the sub-criterion of the rule of law are high (0.83), the amount of the difference between weighted (multiplied by Rule of Law Index score) and unweighted assessments are not significant. This indicates low risks associated with the general conditions of compliance with legal safeguards in Germany.
Enabling Infrastructure Environment
Germany ranks 12th among 193 countries in the UN GlobalE-Government Development Index. Germany also has relatively high business environment development indicators, ranking 20th in the world.