Is Cryptocurrency Legal in Germany?

With every day passing by, the total number of investors investing in crypto is increasing at a rampant rate. Till November 2021, records say more than 103 countries have legalized the use of cryptocurrency in their country. 

Is cryptocurrency legal in Germany? Let us explore further to get an answer to all our queries.

Is crypto legal in Germany?

Yes, cryptocurrency is legal in Germany. As per the statements released by the BaFin crypto regulations and KWG (German Banking Act), individuals and businesses may buy, sell and trade cryptocurrencies. However, the user must remember that cryptocurrencies are not recognized as legal tender in Germany but as “units of account.”

What are the most popular cryptocurrencies in Germany?

  • 1inch Exchange
  • Bitwala
  • FinLab
  • Minespider
  • The NAGA Group
  • Tangany
  • Coindex
  • IOTA Foundation
  • Bitbond
  • USDX Wallet
  • Blocksize Capital
  • CryptoTax

Do Germans like and use cryptocurrency?

According to a report by Ku Coin, more than 44% of Germans are “motivated to invest in cryptocurrencies to be a part of ‘the future of finance'” while over a third or “37% of German crypto investors have been trading cryptocurrencies for over a year.

The majority of German cryptocurrency owners are in the age group of 18-35 years. 5% of them are 55 and above. Cryptocurrencies are largely owned by young, tech-savvy, and affluent German residents.

Johnny Lyu, CEO of KuCoin — the company publishing the report — explained to Cointelegraph the state of play of Germany’s crypto investors:

Cryptocurrencies are prevalent among the supporters of the accumulation strategy, especially among the younger generation. They prefer to save for retirement on their own and diversify their savings through using cryptocurrencies.

How is crypto taxed in Germany?

Unlike other countries, Germany views cryptocurrency as a private asset instead of property,  subjecting it to various tax implications. Thus, crypto attracts an individual’s Income Tax rather than Capital Gains Tax – but only in specific circumstances.

When will you pay tax on crypto in Germany?

You’ll only pay tax as ‘other income’ on crypto gains:

  • If you sell crypto in the same year, you bought it and realized a profit of over €600,
  • If you sell crypto used in staking/lending protocols within one year of buying it,
  • When you’re mining, you are staking or earning an income from crypto.

How much tax do you pay on crypto in Germany?

In Germany, you’ll pay Income Tax on short-term capital gains and from most crypto income like mining or staking. The tax rate is the same as your regular Income Tax rate – up to 45% plus the 5.5% Solidarity Tax. But if you hold for a year, you’ll pay no tax on your crypto gains. 

  • If you’ve kept your crypto for less than a year, you’ll pay Income Tax on any profits from the disposal. Disposals include selling your crypto for EUR (or any other fiat currency), swapping your crypto for another cryptocurrency, or spending your crypto on goods and services. Each taxpayer is allowed up to €600 per calendar year tax-free for short-term gains.
  • If you’ve held your crypto for more than a year, you can dispose of your private asset tax-free, so it pays you to keep it. 

When do you don’t pay tax on crypto profits?

  • If you sell, swap or spend your crypto after owning it for one year or more.
  • If the total earnings from your short-term investments are less than €600 per annum
  • If you earn less than €256 as additional income from crypto (and other sources) throughout the financial year

Popular Questions: 

Got more doubts? Here are some frequently asked questions about crypto taxes in Germany.

Q1. Is crypto mining legal in Germany?

Yes, Bitcoin mining and other crypto mining are legal in Germany. To operate on a commercial level, the user needs a BaFin license.

Q2. Where can I find the German cryptocurrency regulation?

You can find the regulations on cryptocurrency from German Federal Central Tax Office or Bundeszentralamt für Steuern (BZSt).

Q3. Is Binance legal in Germany?

Germany had announced a ban on Binance in 2021. As a result of the decision, the exchange is no longer allowed to offer futures and derivative products in the country. However, this does not restrain the citizens from opening accounts in the business and trading regular crypto products and services.

Cryptocurrency exchange Binance is in talks to gain regulatory approval in Germany, founder and CEO Changpeng “CZ” Zhao said.

Q4. Are crypto futures legal in Germany?

Since Binance and many other crypto exchanges removed futures and other derivatives products from their site for German investors (as well as across many different European countries), the EU and other EEA countries have been putting pressure on crypto exchanges to offer responsible investment opportunities. However, this restriction doesn’t mean the crypto future is banned in Germany.

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