Cryptocurrency ownership in Germany is booming, primarily among young, tech-savvy, and affluent residents increasingly embracing Bitcoin and Ethereum. A recent KuCoin Survey has unveiled some fascinating trends in the German crypto landscape. Notably, a quarter of German crypto users entered the market in the past quarter, with Millennials leading the charge despite market fluctuations. Additionally, nearly half of these users aim for long-term wealth accumulation, highlighting the growing acceptance of cryptocurrencies as a legitimate asset class for securing their financial futures.
The
report
highlights that 41% of Gen Z crypto investors started investing in digital assets over the past three months to one year. Most German crypto investors fall within the Gen Y category, aged 26 to 39, representing 51% of the market, while Gen X, aged 40 to 60, follows closely behind with a 30% market share. Surprisingly, Gen Z, aged 18 to 25, constitutes only 19% of crypto investors in Germany.
Bitcoin remains the preferred choice for German crypto enthusiasts, closely followed by Ethereum, NFTs, and Metaverse projects. These insights provide a clear view of Germany’s evolving crypto landscape, where the government aims to lead in regulating cryptocurrencies across sectors with comprehensive legal frameworks, showcasing its commitment to quality in the crypto market.
Germany Crypto Regulation 2023
18-09-2023: BaFin Called for Global Crypto Regulation (Source: Link)
The German Federal Financial Supervisory Authority (BaFin) emphasized the necessity of global regulation in the crypto industry, even though significant progress had been made in the European Union by adopting the comprehensive framework of markets in Crypto Assets (MiCA).
BaFin highlighted the need for consistent worldwide implementation of common principles and the absence of exceptions from global regulatory standards. This call for global crypto regulation aligned with India’s recent push for collaboration among G20 member states on crypto regulations.
16-08-2023 Germany’s ‘Future Finance Act’ to boost Fintech Revolution and Startups Source:(
Link
)
The German government introduced the “Future Finance Act” on April 5, passed by the Federal Cabinet on August 16, 2023. aiming to create a favorable environment for financial innovation
startups
.
The legislation included digitizing capital markets, reducing IPO requirements, and facilitating institutional investments. Meanwhile, as a G7 member, Germany collaborated on developing stricter crypto regulations.
26-07-2023 Binance Withdraw Cryptocurrency License Application in Germany (Source:
Link
)
Binance withdrew its application for a cryptocurrency custody license in Germany on July 2 after reports of rejection by regulatory authorities.
This move comes after BaFin, the German Federal Financial Supervisory Authority, reportedly denied Binance’s custody license application on
June 29
. Binance has confirmed the formal withdrawal of its application and intends to re-apply with modifications to align with the changing regulatory landscape.
20-04-2023: European Parliament Passes MiCA: Transforming the EU Crypto Landscape (Source:
Link
)
On April 20, the European Parliament passed the MiCA (Markets in Crypto-Assets ) regulation, marking a crucial development for the European Union’s crypto industry. Before MiCA, crypto firms faced 27 different regulatory frameworks across EU states. MiCA introduces unified regulations, allowing companies to operate throughout the EU with a single license.
This boosted competitiveness for EU startups and attracted institutional investors. Additionally, MiCA aims to establish a reliable framework, build trust, and ensure transparency by classifying assets and approving new tokens. It sets the stage for potential NFT and DeFi regulations and positions the EU as a global standard-setter in crypto.
08-03-2023 BaFin Proposes Individual Assessment for NFTs, Avoiding Broad Classification
(Source:
Link
)
BaFin decided not to classify non-fungible tokens (NFTs) as securities. Highlighting the need for case-specific evaluation. In their note published on March 8, BaFin clarified that existing criteria didn’t align NFTs with securities.
However, if a group of NFTs shared repayment and interest claims, they could have been treated as securities. BaFin recommended categorizing NFTs as “crypto assets” individually, recognizing the limited potential for this label due to exchangeability issues and standardization challenges. Consequently, BaFin exempted NFTs from licensing requirements and Anti-Money Laundering supervision unless they were considered “crypto assets.”
Government stance on Cryptocurrency
Germany is 2022 planning to allow certain institutional funds to invest billions of dollars in crypto assets for the first time. The law will take effect with Special Funds with fixed investment rules putting as much as 20% of their holdings in Bitcoin and other crypto-assets.
The Germans are well aware of the benefits of the latest Fintech innovations and the country has a leading role in the EU with most of the innovations and industries. The government wants more and more youth and start-ups to get involved in the recommendations and participate to reinforce the German economy.
In addition to fintech, there is a huge interest in blockchain and crypto from a wide range of industries. The Germans exhibit their head toward digital assets and blockchain technology. The German youth within the age group of 18-29 occupy the major share among the interested people in investing in digital assets.
Taxation on Cryptocurrencies In Germany
Crypto in Germany is considered Private Money, meaning if crypto is not a legal tender, vendors are not supposed to act on it. Tax on Crypto profits is Totally free, under 600€, similar to fiat transactions.
Germany is known as a ‘
Bitcoin tax haven’
because
,
in Germany, cryptocurrency transactions are exempted from VAT(Value-added tax)and have no capital gains tax. The buyers must hold their digital assets for at least 12 months to get exempted from the taxes. If the cryptocurrencies are sold before 12 months, then the gains on the sale will be taxed with a Progressive Income Tax of between
14% and 45%.
(Source:
Link)
Personal Income Tax Rates Germany
The ESTG German Income Tax outlined in section 23 covers that tax treatment of speculative transactions made with private money, Crypto earnings, and other sources of income are reported on the same income forms.
In the case of the exchanges that buy or sell cryptocurrencies with their own name working as an intermediate, they will be exempted from tax. However, the exchanges working in the technical marketplace would not be entitled to any relief.
Cryptocurrency Mining In Germany
The German mined 666 Bitcoin and 26,554 Ether in the last quarter of 2021, according to Wednesday’s German Mining Firm announcement. Whereas Northern Data Mined Over 5000 ETH and 227 BTCs in December. The shares of the Frankfurt-listed company had a rise of 8.4%, which was $88. Ether was mined exclusively using renewable energy, as stated by a top computing power provider company for mining Northern Data.
The Northern Data company also produces high-performance computing infrastructure for business, including GPU and ASIC technologies and other high computing purposes needed for cryptocurrency mining.
Mining usually requires high computing power, which is not budget-friendly for private users. The miners must withstand the cost of purchasing the equipment, where they need to pay in advance.
And nowadays, more than only mining, mining pools or rigs are in great demand, a pool of resources by miners. Due to high computing power, these can perform the mining process within a reasonable amount of time.
For this reason, the miners are joining the network to form mining pools. Here, one can invest in a mining pool under certain laws formed under Investment Laws. The third-party investment enables the miners to increase their mining power, and investors can benefit from the mining profits.
Historical events & Announcements
17-10-2022-Germany Surpasses the United States as Leading Crypto Economy in Q3: Report (Source:
Link
)
In the third quarter of 2022, Germany surpassed the United States as the world’s most crypto-friendly economy, according to Coincub’s rankings. Germany’s appeal stemmed from its traditional tax approach, granting tax exemptions for crypto holdings held for over a year.
Meanwhile, the United States slipped to seventh place due to less favorable crypto tax policies despite allowing crypto in workplace pensions. Other top-ranking countries included Switzerland, Australia, the United Arab Emirates, and Singapore, each offering unique advantages for the crypto community. Vietnam led in crypto adoption, while the United States had many crypto investors.
11-05-2022-Germany Introduces Favorable Tax Rules for BTC and ETH Profits Held Over a Year (Source:
Link
)
Germany’s federal finance ministry has provided clear instructions on the tax treatment of cryptocurrencies, stating that holding staked or lent cryptocurrencies for over a year will remain tax-free, allowing individuals to sell Bitcoin or Ether without tax liability after a year of ownership.
The guidance covers cryptocurrency activities, including mining, staking, lending, hard forks, airdrops, and buying and selling Bitcoin and Ether. Notably, it confirms that the one-year tax exemption applies even when cryptocurrencies are used for lending or staking. Additionally, the guidance clarifies that income tax won’t be imposed when redeeming utility tokens that grant specific rights. This interpretation is supported by a 2018 court ruling related to bearer bonds.
18-04-2022: Germany is ranked first in the
Crypto Ranking Guide and knocks off the US and Singapore as the
most crypto-friendly countries.
According to Coincub, Germany is now the most Crypto-friendly company in the world. The significant move is an achievement and a glimmer of hope, given the current uncertainty surrounding cryptocurrency regulation in the EU. Further, Germany takes the top spot in the latest Q1 international crypto ranking guide for 2022. Germany’s decision to allow crypto investments to form part of its huge domestic savings industry and acceptance of cryptocurrency gets it to the top spot along with some other key data.
15-04-2022: A hype in Germany’s Crypto Art.
Digital Art was hidden for a long time in Germany, Now, it is attracting worldwide attention in the Art market. With the aid of computers, art produced was first displayed in a Stuttgart gallery in early 1965; after that, digital art has gone through many changes as media or networks.
20-05-2021:
Germany’s new Fund Location Act coming into effect on 1st July 2021 Spezialfonds (domestic special funds) will be permitted to invest up to 20% of their portfolios into crypto assets like Bitcoin. Crypto assets in special funds are an important step towards legitimizing crypto assets as an asset class.
04-03-2020:-
German federal authority BaFin officially clarified the status of Bitcoin and other cryptocurrencies as ‘Financial Instruments’.
21-02-2020:-
The Federal Financial Supervisory Authority of Germany, BaFin, released additional guidance with reference to its stands on cryptocurrencies. Cryptocurrency issuers are required to get a license from the regulator.
24-07-2019:-
BaFin announced that from 01 January 2020, a license is mandatory for all crypto exchanges and wallet providers. Cryptocurrency businesses should abide by the Anti-money laundering law no matter whether any overseas entities are targeting German customers.
20-05-2019:-
The German government is keen to introduce blockchain regularization and tokenization. They released guidance for the same. The main focus was on German laws specifying capital investment and security regulated by their respective regime. The guidance also emphasized the characteristics of the tokens and explained the effects of new tokens on the financial regulation of Germany. Hence, BaFin approved its first security token.
15-11-2017:-
The German Federal Financial Authority (BaFin) stated customers warning them about the risks involved in Initial Coin Offerings(ICOs). The authority considered the ICO’s lack of legal requirements and transparency obligations. This could result in an immense risk for the customers.
12-06-2017:-
The German and Austrian governments came together to fund research,’ Bitcrime’, which focused on using digital currencies in organized crime.
20-09-2016:-
The Deutsche Bank Bundesbank termed Bitcoin and other virtual currencies ‘trustless’ and also doubted authenticity. Delivering a speech at the Official Monetary and Financial Institutions Forum(OMFIF), an executive board member indicated that the nature of the peer-to-peer transfer of virtual currencies has no natural value.
23-05-2014:-
The German Ministry of Finance, the Bundesministerium der Finanzen (BMF) published a new document suggesting a tax on Bitcoin sales. The retailers would be taxed twice, once on the sale of goods and, secondly, when they seek to sell bitcoins they accept in purchases.
19-12-2013:-
BaFin releases an overview of risks related to virtual currency. It also indicated that using Bitcoin for commercial purposes would require a license and could be permitted in some circumstances.
19-08-2013:-
German Finance Ministry says virtual currency is not e-money or foreign currency. But also made it clear that they are still financial instruments as mentioned under German rules. It further stated that virtual currency can be taxed as capital.
22-12-2011:-
The German Financial Supervisory Authority BaFin said that Bitcoins are commodities that are subject to tax. They further said that Bitcoins are exempted from the definition of e-money as they are not tied to any legal tender currency.
Conclusion
The ongoing development of legal regulation for the decentralized industry in Germany has resulted in 16% of the German population aged between 18 and 60 as crypto investors. In addition, 41% of the aforementioned crypto investors intend to increase the shares of their investments over the upcoming six months due to the cryptocurrency-friendly environment in Germany, with tax exemption and legal mode of payment. Hence, seeing the future of cryptocurrencies and blockchain technology in the country with new innovations and regulations would be more interesting.
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