Friendly British and German Decisions Show Increasing Bitcoin Acceptance in Europe
As institutional interest in Bitcoin peaks, the UK introduces a regulatory framework to attract investments, while Germany's largest state bank now offers Bitcoin custody to institutional clients.
Bitcoin’s future in Europe is trending towards increasing acceptance, as the British government and Germany’s largest state-run bank have adopted friendly policies to attract institutional investment.
Although Bitcoin and its earliest community of developers certainly originated in the United States, Europe has also had more than its fair share of interest in the decentralized currency. Even though Asia has obviously been home to some of the flashiest measures of success, such as the largest international crypto businesses and substantial mining output, Europe has actually led all other continents in raw Bitcoin adoption. Europeans have also left a durable influence on the scene today. For example, although Russia has seen its Bitcoin spaces diminish in prominence in recent years, they still had an outsized presence in the 2010s, when many governments were much more outwardly hostile.
However, even though Bitcoiners in that country are still making progress, a particularly salient motivation for them has historically been circumventing the international financial establishment. At a moment where Bitcoin is seeing all-time highs in profit and record levels of acceptance worldwide, this sort of approach will only get it so far. Since the Bitcoin ETF has turned into a billion-dollar industry, it may be more important to look towards those nations where friendly regulations can effectively sync up with a corporate ecosystem flush with new investment. Luckily, other European nations are taking charge.
On April 15th, British Economic Secretary to the Treasury Bim Afolami announced that the United Kingdom was planning to issue new regulations for the digital asset industry by July. In a speech to the Innovate Finance Global Summit (IFGS), Afolami claimed that “a whole host of crypto-asset activities, including operating in exchange, taking custody of customer assets, and other things, will come within the regulator perimeter for the first time” after the new regulations are finalized. He even went so far as to call Britain’s successful “delivery of our regulatory regime for crypto assets” the “cornerstone of our position as a world leader in fintech”.
These promises come at the tail of a series of new regulations that the British Government passed in 2023, intended to create a basic framework that integrates Bitcoin’s various industries into the legal system. The current government has a stated intention of turning the United Kingdom into a global hub for cryptocurrency, and it has been working to build this sort of framework with that explicit goal in mind. Now that 2023’s legislation has provided the means of incorporating the industry into the legal system, the new project has several goals: to promote innovation in the digital asset and blockchain industries, increase protections for users, and iron out certain legal ambiguities in the framework as it stands. Afolami also stated that an open finance task force will be created to monitor the situation and “craft a clear set of recommendations” for the next round of tweaks.
Although the exact text of these regulations has not yet been revealed, all publicly available comments seem to point towards one goal: making it as smooth as possible for Bitcoin’s economic activities to integrate with the broader market, and vice versa. However, that is not the only approach. In Germany, for example, Landesbank Baden-Württemberg (LBBW) will begin allowing institutional customers to custody Bitcoin directly, thanks to a partnership with the exchange BitPanda. Although Germany has several entirely private banks with a substantial influence on the world market, Landesbanks like LBBW operate only with the backing of the federal government. LBBW is the largest in this category, with a broad base of customers and over $335 billion in assets under management. LBBW has a mandate from the nation to pursue the public good in its standard operations across several states, but it is also fully engaged in such services as commercial banking, asset management, and international investment.
Gonzalo Lamas, Head of Global Communication at BitPanda, described in an interview how his company has helped LBBW enter this market: “As part of this cooperation, LBBW leverages our “Investment-as-a-Service” infrastructure and services, which is used to source and provide custody services for cryptocurrencies such as Bitcoin”. He added that “The collaboration aims to enhance LBBW's digital asset offerings, ensuring high security and innovative solutions for corporate clients”. Still, it’s something of a shock that a bank essentially controlled by the federal government would enter a partnership with BitPanda to offer custody services like this. However, as Jürgen Harengel, managing director of corporate banking at LBBW put it, “The demand from our corporate customers for digital assets is increasing.”
In other words, Bitcoin has simply been so wildly profitable as of late that large institutions in Germany have been putting out feelers in all directions. LBBW is merely happy to capitalize on this wider trend. In fact, Deutsche Bank, Germany’s largest private bank, has already been working on its own custody program, so LBBW is aiming to take their custody services live by the second half of 2024. By December, the European Union is set to see the Markets in Crypto-Assets (MiCA) regulations take effect, and this comprehensive legal framework will encourage the entire financial industry to get entangled with Bitcoin. For LBBW, it’s therefore best to hit the ground running.
These two countries have shown radically different examples of how government actors can grease the wheels for Bitcoin, but both have clear merits. British regulators are trying to make a comprehensive legal framework that will attract Bitcoin-related activity, while LBBW is trying to preempt this framework from the European Union by directly catering to Bitcoin’s rising interest. In either case, the goal is the same: encourage major corporations to dip their feet into the world of Bitcoin so that the broader national economy will profit from Bitcoin’s rise to the top. As recent data has shown, the United Kingdom and Germany have some of the largest government-held stockpiles of Bitcoin, only lagging behind the superpowers of the US and China. For both of these Bitcoin-holding countries to show such interest in a short period of time, it can only be a good thing.
Nevertheless, just because these two governments have shown a new interest in Bitcoin, it doesn’t mean that the situation is purely maximalist all across the continent. For example, the government of Norway signaled its intentions to curtail Bitcoin mining on April 15th, and this came less than one month after Iceland’s Prime Minister made similar comments. Still, the tide is turning. Even though some of the more chaotic elements of Bitcoin’s economy may prove unsavory to these elected officials, the money is simply too good. Regardless of how they feel, institutions everywhere want in. LBBW entered the custody business so private banks wouldn’t outrun it in this sphere, and the British government recognizes that it can’t stay relevant in fintech without Bitcoin. As we look forward to MiCA revolutionizing Bitcoin’s position all across Europe this year, it’s extremely heartening to see leaders take a bullish position.
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