DeFi vs. CeFi #6 - BaFin's publication on NFTs & BaFin vs. Uniswap

Show notes

In our latest episode of PayTechTalk and our 6th "DeFi vs CeFi" series, we talk the latest activities of the German regulator, BaFin. Our host Alireza talks again with Gökhan Nazenin and Henri de Jong about BaFin's publication on NFTs and the regulator's intervention against Uniswap.

BaFin publication on NFTs After BaFin already commented on NFTs in its publication on crypto tokens, now came the long-awaited article on NFTs in the latest BaFin Journal.

BaFin clarifies what NFTs are, when and how they are regulated and what matters.

Alireza and his guests discuss whether the article adds value to the crypto industry.

The second topic of the podcast fits perfectly with DeFi vs. CeFi. BaFin vs. Uniswap Labs German regulator, BaFin, is looking into Uniswap! What happened?

Uniswap tweeted (in German), using the German flag, and asking German user to use the new Uniswap wallet. The tweet was set by Universal Navigation Inc. So, what does that mean from a regulatory perspective?

"Reverse Solicitation" vs. "Active Marketing"! These are the key words. According to BaFin practice (since 2005), published in the famous BaFin paper (available in English) on cross-border business, BaFin said:

"If the foreign entity specifically targets the market in Germany for the purpose of offering loan agreements repeatedly on a commercial basis to companies and/or persons that have registered offices or ordinary residence in Germany, I generally deem this to constitute lending activities requiring a license (section 1 (1) sentence 2 no. 1 KWG).

By contrast, simply maintaining existing client relationships or concluding loan agreements at a client's own initiative, which is typically the case with large corporate clients or institutional investors, do not require a license (freedom to provide requested services)."

This milestone publication was approved by the highest German court, is meanwhile accepted by ESMA and Swiss FINMA and builds the cornerstones for BaFin's market investigation practice.

BaFin is using a very sophisticated web-screening tool, where terms like "Germany", "Germans" or symbols like the German flag are screened against any financial or crypto publication.

Hence, using the terms (specifically by also using the German flag, otherwise you can always argue that you approached the German speaking community in Austria, Switzerland and so on) is a red flag! Using an entity doing so, makes your decentralized systems "not so decentralized".

Our podcast participants talk about whether BaFin had to intervene here.