Would a country like Germany be allowed to prohibit the ownership and trade of Bitcoin, as is the case in China? Dennis Hillemann of www.blockchainlawyersnetwork.com treated this topic in a lecture on 9.9.2020 from a constitutional viewpoint. Does the German constitution protect Bitcoin? Please find attached the presentation on this legal matter in the blockchain and cryptocurrency space.

1. May Bitcoin be banned under
German law?
Hamburg – September 9, 2020
Dennis Hillemann, Attorney at law / Partner at a large commercial law firm
Legal nature and legal protection for
Bitcoin under constitutional aspects

2. CV
Dennis Hillemann
Attorney at law
QUALIFICATIONS — Attorney at law (Admission: 2006)
— Specialist attorney for the German Administrative law (2010)
EXPERIENCE — 14 years / Public sector (administrative law, state aid law, subsidy law, budget law).
— Head of the KPMG solution “Consulting in administrative procedures”; the responsible partner for ministries, authorities,
and public companies, especially for new forms of cooperation and financing.
— Engagement in the field: blockchain and law; Participation in DIN-SPEC 4997: “privacy by blockchain design” (German
Institute for Standardization – Deutsches Institut für Normierung e.V ).
— Speaker at various events (OECD Global Blockchain Policy Forum, IT Day for jurisprudence).
— Podcasts on blockchain topics “The Blockchain Lawyer” (Apple Podcasts, Google Podcasts, and Spotify).
— Founder – „The Blockchain Lawyers Network“ www.blockchainlawyersnetwork.com.
SELECTED
MANDATES
Federal ministry:
— Ongoing representation at German administrative courts, handling constitutional questions.
Research institutions and universities:
— Ongoing legal advice on all scientific law issues (in particular on governance, IT, university law, joint appointments,
technology transfer, cooperation agreements), advice on university law as well as on grant and funding law issues
LANGUAGES — German (Mother tongue)
— English (fluent)
— French (business fluent)
KPMG Law, Hamburg
T +49 40 360994-5045
F +49 1802 11991-1670
M +49 151 50638412
dhillemann@kpmg-law.com
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3. 3
www.blockchainlawyersnetwork.com

4. Hypothetical (fictitious) case
4
The programmer and software developer S from Hamburg has been developing technical support for
blockchain solutions in various economic sectors for companies from all over the world since 2010.
During a conference, S heard that on suspicion of illegal circulation of assets with crypto values, a new
(fictitious) law to combat the illegal circulation of assets through cryptocurrencies had been enacted in
compliance with all formal requirements.
§ 2 of the (fictitious) law: “The transfer of ownership on cryptocurrencies, digital storage and custody
for cryptocurrencies are prohibited."
S is outraged by the new (fictional) law and wants to protect himself against it. S supposes that the
(fictitious) law violates the property guarantee (Article 14 of the German Constitution).
Would S´s constitutional complaint (under Art. 93
I No. 4a GG, §§ 13 No. 8a, 90 ff. BVerfGG) be
justified?

5. Are property bans even conceivable in Germany?
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Illegal explosive
(material) possession even offense (!) by § 40 Explosive Material Act
Illegal weapon
possession:
even crime (!) by § 55 Weapon Act
Narcotics:
according to § 134 of the German Civil Code – property cannot be acquired because, in the
event of unauthorized trading with narcotic drugs, not only the contracts but also the
fulfillment transactions are null and void (BGH, Beschluss vom 05.03.2009 – 4 StR 19/09)
Result: Yes, following the German Constitution and therefore
constitutionally justified

6. Property – Inheritance – Expropriation, Article 14 of the German
Constitution
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(1) Property and the right of inheritance shall be
guaranteed. Their content and limits shall be
defined by the laws.
(2) Property entails obligations. Its use shall also
serve the public good.
(3) Expropriation shall only be permissible for the
public good. It may only be ordered by or
pursuant to a law that determines the nature and
extent of compensation. Such compensation shall
be determined by establishing an equitable
balance between the public interest and the
interests of those affected. In case of dispute
concerning the amount of compensation,
recourse may be had to the ordinary courts.

7. Structure for legal analysis (Article 14 of the German Constitution)
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III. Justification
II. Violation
I. Scope of protection
— Final (Pursuing the legislative direction)
— Instantaneously (no other enforcement action required)
— Establishing the legal consequence (establishment or cancellation of a right,
establishment or cancellation of an obligation)
1. Determination of the limit for the right
2. Constitutionality of the legal basis
a) Formal constitutionality
b) Substantive constitutionality
aa) Limit-specific requirements
bb) Proportionality
1. Personally (everyone´s basic right)
2. Objectively (Protection object: Property, but not wealth in general)

8. Structure for legal analysis (Article 14 of the German Constitution)
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2. Objectively
1. Personally
I. Scope of protection
Everyone´s basic right
Property
Definition (of property): the sum of all asset items that are assigned to the individual
by the legal system, and grant the rights of use and disposal
For private law: „power of disposal“ over the thing (§ 903 of the German Civil Code)
Are Bitcoin and other cryptocurrencies covered by the protection?

9. Structure for legal analysis (Article 14 of the German Constitution)
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The property quality of Bitcoin and other cryptocurrencies (comparisons)
BVerfG (Federal Constitutional Court)
(Beschluss vom 18.01.2006 -2 BvR
2194/99, NJW 2006, 1191 (1193)
Decision recitals: „the fundamental
right of property is affected in any
case if tax obligations are linked to
the existence of what has been
acquired.“
Result:(-), Insofar as the highest
court rulings on the possibility of
measuring what has been acquired
are linked to Article 14 of the Basic
Law, it is difficult to transfer it to the
cases with crypto values.
Wealth Share ownership (share)
BVerfG (Beschluss vom 30.05.2007 -
1 BvR 390/04, NJW 2007, 3268
(3269), Rn18.)
Question: Is blockchain comparable
to a corporation?
Result: (-), Regarding the blockchain,
the cryptographic keys represent a
means of verifying or approving the
desired transaction.
Private law claims
BVerfG affirms the possible
applicability of Article 14 of the Basic
Law to claims under private law.
Question: What is the legal nature
of the users´ interaction in the
decentralized system?
— Civil law partnership (-), no
contract and no will to be legally
bound
— Community by fractions under §§
741 ff. of the German Civil Code
(-), cryptographic keys enable
transactions.

10. Structure for legal analysis (Article 14 of the German Constitution)
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Bitcoin and other cryptocurrencies are crypto
values ​​according to the legal definition in § 1
para 11 of the Banking Act (KWG).
Legal definition: Crypto values ​​are digital representations of a value that has not been issued or
guaranteed by any central bank or public body and does not have the legal status of currency or
money, but is used by natural or legal persons based on an agreement or actual practice as an
exchange or means of payment, is accepted or is used for investment purposes and which can be
transmitted, stored and traded electronically.
Acceptance as value of crypto values such as Bitcoin by the law
An electronic bond = object by § 90 of the German Civil Code (under § 2 para 3 of the Draft Law on
the introduction of electronic securities)
Result: Yes, Bitcoin is covered by the protection. The legislator has
opted for protection.

11. Structure for legal analysis (Article 14 of the German Constitution)
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II. Is there a violation?
Final: Objective to prohibite
cryptocurrencies
Instantaneously (no
„intermediate step“ required )
Cancellation
of the property right (Legal
consequence)
Result: Yes, limitation of the property guarantee.

12. Structure for legal analysis (Article 14 of the German Constitution)
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III. Justification: Would this limitation be justified??
2. Constitutionality of the
legal basis
a) Formal constitutionality (Authority, procedure rules and form were
followed.)
1. Determination of the
limit for the right
Here: a simple legal reservation

13. Structure for legal analysis (Article 14 of the German Constitution)
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ccc) Suitability
Creation of the general regulation that not only restricts the right to use and dispose
of cryptocurrencies, but also (!) forbids them.
bbb) Legitimate
means
Law (Act)
aaa) Legitimate
purpose
Possibly ligation of the illegal circulation of funds (still questionable: KWG and
eWpG-E, even the property law fiction)
b) Substantive constitutionality

14. Structure for legal analysis (Article 14 of the German Constitution)
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ddd) The necessity of the means – Evaluation prerogatives of the legislator
Result: doubtful regarding the scope of the evaluation.
It is necessary if no milder means for achieving the purpose is available or milder means are not
immediately suitable for achieving the purpose.
Evaluation prerogatives
− Estimation
− Evaluation (possibly a milder means – e.g.,
subject to permission instead of the absolute
ban on cryptocurrencies, trading only through
banks / approved traders, etc. many security
options conceivable?)

15. Structure for legal analysis (Article 14 of the German Constitution)
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eee) Appropriateness (proportionality in the narrow sense)
Contra:
− 5. AML (KYC)
− Compliance with the Money
laundering act (German GWG) for
crypto exchange platforms even
before the 5th AML Directive
Result: the overall balance does not lead to the predominance of an interest in
Bitcoin and other cryptocurrencies being prohibited in Germany.
Overall result: Violation of the property guarantee.
Appropriateness is maintained if the encroachment on a fundamental right is not
disproportionate to the intended purpose (balance: contra and pro)
Pro:
Ligation of the illegal circulation of
financial positions

16. Addition: possible EU ban on Bitcoin and other cryptocurrencies?
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− Similar considerations apply as before.
− EU Charter of Fundamental Rights, Article 17 Property Right
(protection similar to the Basic Law for the Federal Republic
of Germany) – recital against the possibility of a ban.
− European Blockchain Strategy (September 2019)
− Also: Several publications on behalf of the EU Parliament
and the EU Commission on the need to develop the EU as a
blockchain location
− Specialized EU institutes (EU Blockchain Partnership, EU
Blockchain Association, EU Blockchain Observatory and
Forum)
− Further protection of fundamental rights by the Federal
Constitutional Court (BVerfG) by Article 51 para 1 of the EU
Charter of Fundamental Rights
− Responsibility for the integration of the BVerfG under Article
23 para 1 of the Basic Law for the Federal Republic of
Germany (Union fundamental rights as part of the protection
of fundamental rights to be enforced)
− Close cooperation between the BVerfG and the ECJ
according to Article 267 para 3 TFEU
Result: unlikely that the EU can or would ban Bitcoin. In addition to political
reasons, there are also legal reasons.

17. Conclusion and outlook
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 Property guarantee in Article 14 of the German Constitution protects Bitcoin
 EU Charter of Fundamental Rights (Article 17 Property) protects Bitcoin
 Amendments to the KWG 2019 speak against the ban
 The draft eWpG favors the broad recognition of blockchain
 EU-wide development of legal provisions
 Blockchain Strategy of the Federal Government (Germany)
These reasons suggest that a ban of Bitcoin and other cryptocurrencies is very unlikely!

18. Thank you very much for your attention!
18
www.blockchainlawyersnetwork.com
Dennis Hillemann
KPMG Law, Hamburg
T +49 40 360994-5045
F +49 1802 11991-1670
M +49 151 50638412
dhillemann@kpmg-law.com