Cryptocurrency regulation

Cryptocurrency Regulations in Germany – Crypto Capital of Europe

Written by: Qadir AK

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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Apr 17, 2022

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Cryptocurrency in Germany is heavily owned by young, tech-savvy, and affluent German residents is growing rapidly with widely using Bitcoin and Ethereum, Currently, in German more than 2.62% almost 2.1 million population of Germany is using cryptocurrency with Bitcoin as a leader, the majority of the group is between the age group of 18-34 which is 33% and 5% are above 55 of the total population. 

Germany is known for its quality which is always in high demand whether its goods or any services. In past years, Germany has successfully labeled itself as the ‘Crypto Capital of Europe’. The government also intends to use blockchain in various sectors making the country the first among the European Nations completely regulate cryptocurrencies with sufficient documents.

Germany has one of the highest concentrations of Bitcoin nodes with about 19% of the nodes scattered all over the world.

Germany Crypto Regulation 2022

18-04-2022: Germany is ranked first in Crypto Ranking Guide and knocks off US and Singapore as 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 shot 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 longer 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.

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 up’s 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 then 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 and have no capital gains tax. The buyers are required to hold their digital assets for a minimum period of 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 45%.

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 which buy or sell cryptocurrencies with their own name working as an intermediate, will be exempted from tax.  But 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 the German Mining Firm announcement on Wednesday. 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 stated by one of the top computing power provider companies 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 any private users. The miners have to withstand the cost of purchasing the equipment where-in they need to make payment in advance.

And nowadays, more than only mining, mining pools or mining rigs are in great demand which is a pool of resources by miners. These can perform the mining process within a reasonable amount of time due to high computing power. 

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 also be benefited from the mining profits.

Historical events & Announcements

20-05-2021: Germany’s new Fund Location act coming into effect on 1st July 2021 Spezialfonds (domestic special funds) will be permitted in the country to invest up to 20% of their portfolios into crypto assets like Bitcoin. Crypto assets in special funds are an important next 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 they might be any overseas entities targeting German customers.

20-05-2019:- The German government is very 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 which are regulated by their respected regime. The guidance also emphasized on the characteristics of the tokens and also explained the effects of new tokens on the financial regulation of Germany. And hence BaFin approved its first security token.

15-11-2017:- The German Federal Financial Authority (BaFin) issued a statement to customers warning them about the risks involved in Initial Coin Offerings(ICO’s). The authority considered 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 the use of digital currencies in organized crime. 

20-09-2016:- The Deutsche Bank Bundesbank termed Bitcoin and other virtual currencies as ‘trustless’ and also expressed its doubt on authenticity. Delivering a speech at the Official Monetary and Financial Institutions Forum(OMFIF), a member of the executive board indicated that the nature of the peer-to-peer transfer of virtual currencies does not have any natural value.

23-05-2014:- The German Ministry of Finance, the Bundesministerium der Finanzen (BMF) published a new document suggesting a tax on Bitcoin sale. The retailers would be taxed twice, once on 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 the use of Bitcoin for the commercial purpose would require a license and could be permitted in some circumstances.

19-08-2013:- German Finance Ministry says that 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:- 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 to 60 as crypto investors. In addition, 41% of the aforementioned crypto investors are intended to increase the shares of their investments over the upcoming six months due to the Cryptocurrencies friendly environment in Germany, with tax exemption and legal mode of payment. Hence it would be more interesting to see the future of cryptocurrencies and blockchain technology in the country with new innovations and regulations.

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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