The new German government has made room for crypto in its coalition agreement, soliciting for an equal playing field between traditional finance and “innovative business models.”

Three German parties agreed on a coalition this week. The Social Democrats (SDP), Green Party and right-leaning Free Democrats (FDP will take over in December.

Quoting a rough translation of the 177-page agreement published on Nov 24, the coalition is in support of a new “dynamic in relation to the opportunities and risks from new financial innovations” such as crypto assets and blockchain businesses:

In order to provide holistic, risk-adequate oversight of the new business models we are making European financial markets supervisory law compatible for digitization. […]The crypto sector needs European oversight. Crypto asset service providers are required to identify beneficial owners consistently.

According to the document, the EU supervisory authority should “not only take care of the traditional financial sector but also prevent the misuse of crypto values for money laundering and terrorist financing.”

After the German federal elections on September 26, it took the coalition two months to form. It signals the end of Angela Merkel’s 16-year reign as Chancellor and she will be replaced by the SDP’s Olaf Scholz.

Meanwhile, the European Council which oversees the EU’s political agenda adopted two proposals named the ‘Regulation on Markets in Crypto Assets (MiCA) framework and the ‘Digital Operational Resilience Act’ (DORA).

The purpose of MICA, which was initially drafted by the European Commission in September 2020, is to create a “regulatory framework for the crypto-assets market that supports innovation and draws on the potential of crypto-assets.”Although it still needs to be approved by the European Parliament, it will subject crypto assets issuers to more stringent requirements if enacted. It is notable that non-fungible tokens and utility tokens do not fall within the regulatory scope.

A Reddit user “BelgianPolitics” labeled the progressive regulatory proposal as the “most important one to date for the entire crypto industry.” in a comprehensive post on the r/Cryptocurrency subReddit on Nov. 26.

The author’s analysis gave a thorough rundown of MICA’s proposed laws and attracted around 900 comments as of this writing. He highlighted the importance of the proposed laws, stating:

All entities operating within the European Union must follow these rules. These rules could become standards internationally due to the “Brussels Effect”. While all eyes are on China and the US, the EU is leading the charge.

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