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MONEY

What to know about cryptocurrency in Germany

Germany has been dubbed the most crypto-friendly country in the world. We break down why that is, and what you should know about cryptocurrency in Germany.

Bitcoin coins
Two "Bitcoin" coins lie on a table. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

As with all of our financial and tax summaries, this is a guide on regulations only. For financial advice which is personalised to your situation, please contact an accountant or other specialist. Please note also that EU financial regulators have warned that many crypto-assets are highly risky and speculative. Find out more information here.

At first glance, Germany seems an odd place to be a cryptocurrency haven. Only 17 percent of people in Germany invest – way behind the percentages seen in other countries – which may go some way towards justifying the country’s reputation as a land of risk-averse savers.

Cryptocurrency, often called crypto for short, is considered by many investment analysts to be one of the riskiest and most volatile investments a person can own.

Concerns have also been raised over the environmental impact of cryptocurrencies.

There are countless types of crypto on the market these days. What each one has in common is that it is digital and secured using cryptography, meaning they can’t be counterfeited. 

Even the three biggest and most well-known cryptocurrencies – Bitcoin, Ethereum, and Ripple – are prone to huge sudden spikes and falls in value. It’s also a market that has seen some, like the LUNA cryptocurrency last month, crash completely.

Yet, bucking national stereotypes, Germany has some of the most favourable laws in the world for investing in these high-risk assets.

READ ALSO: What you should know about investing in Germany

Germany’s crypto tax advantages

Crypto exchange comparison site Coincub recently named Germany as the world’s most crypto-friendly country, with Singapore and the United States rounding out the top three.

A big reason for this comes down to favourable tax laws. Normally, when someone in Germany sells a regular stock or ETF asset at a higher price than they bought it for, their brokerage will automatically withhold 25 percent of their gain in tax.

Euro notes bitcoin coins

Euro notes and bitcoin coins on a laptop. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

But following tax guidance issued by the Federal Ministry of Finance last month, certain gains in cryptocurrency could face absolutely no taxation at all.

Firstly, the ministry has affirmed that any profit of less than €600 faces no tax. More significantly though, cryptocurrency that someone in Germany has held for at least a year faces no tax at all – no matter how big the gain is when that person sells it.

Why is the law so favourable in Germany?

One variable is political. The liberal Free Democrats tend to attract a sizeable number of votes from the very demographics more likely to hold crypto. While the FDP is in a three-way coalition with the progressive Social Democrats (SPD) and the Greens, FDP leader Christian Lindner currently holds the German Finance Ministry.

During the 2021 election campaign, Lindner made regulating and attracting crypto investment a big part of the FDP platform and coalition negotiations.

“I think the German government understands how to make money better than a lot of other countries,” says the man behind crypto Youtuber The Modern Investor, a channel with over 225,000 subscribers.

“A lot of people in the crypto space are very internationally mobile,” he tells The Local. “If they choose to live in Germany for the favourable investing conditions, they’re going to be spending money in German supermarkets and buying German services. The money the government misses out on in taxes tends to go right back in the system.”

“If cryptocurrencies continue to take off globally, Germany will eventually be seen as a genius for figuring out how to attract this money and keep it within its borders,” he adds.

Germany’s crypto niche to go mainstream?

Cryptocurrency is still a niche investment in Germany. While only 17 percent of Germans own stocks, only about 2.6 percent own cryptocurrency.

German crypto investors typically skew younger, with a third of all German crypto investors being 34-years-old or younger. The more a person makes, the more likely they are to hold crypto as well, with two-thirds of all German crypto investors earning €800,000 a year or more.

That narrow niche is still big within the crypto community itself though. Around nine percent of the world’s Bitcoin nodes – the computers that run the secure list of transactions using that currency on a digital ledger known as the blockchain – are in Germany, and 14 percent of Ethereum nodes, another major cryptocurrency. That’s second only to the US.

Cryptocurrencies

A tablet screen displays the value of various cryptocurrencies in the Coinbase app. Photo: picture alliance/dpa | Fabian Sommer

Yet, while German ownership is still small, the community is visible enough to make others curious. That goes for even the traditionally risk-averse savings banks, or Sparkassen – where many Germans park their savings. The Savings Bank Association says around 10 percent of its regular customers already hold cryptocurrency, leading them to start offering customers the chance to invest in a crypto wallet directly from their checking accounts.

Many of the online brokerages popular with Germany-based investors, such as Trade Republic, Scalable, and DKB, also offer cryptocurrency wallets alongside their options to buy more traditional products like stocks and ETFs. Using their smartphone apps, crypto can typically be bought and sold with a few short clicks.

READ ALSO: How to protect your savings against inflation in Germany

The Modern Investor says that’s part of a culture that’s increasingly viewing crypto as just another normal part of the investing landscape. While crypto suspicion is still high globally, Germany has simply chosen to accept that crypto is here to stay, and has decided to benefit from it. 

“Germany has been one of the very few countries that have actually put forth cryptocurrency regulations. So a lot of internationally mobile investors have run to Germany as a bit of safe option,” the Youtuber says.

“Many countries don’t have any regulations at all. That makes things even less predictable. What happens to a crypto investor in the US or China if either of those countries simply ban it tomorrow? With Germany, people know that’s simply not going to happen now.”

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ENERGY

Gas bills in Germany will remain high despite price cap, warns economist

Germany is planning to bring in a cap on the price of gas for consumers. But a leading economist has warned that energy prices will still remain high. What can we expect?

Gas bills in Germany will remain high despite price cap, warns economist

The German government last week announced a €200 billion relief package to help support private households and companies with spiralling energy prices. 

As part of the plans, a gas price cap is set to come into force in Germany, limiting the amount that people pay to use gas amid rocketing prices. 

The details on how it will work are still being thrashed out. But chairwoman of the gas price commission, Veronika Grimm, has dampened expectations for how big an effect the cap will have on energy bills. 

“We will permanently end our dependence on Russia,” the economics professor at the University of Erlangen-Nuremberg told the newspapers of the Funke Mediengruppe.

“So the gas price will remain significantly higher than before the Russian invasion of Ukraine due to higher liquid gas procurement prices – despite a gas price cap.” 

Grim suggested that the gas price cap could be in the form of a one-time payment to encourage people to continue using less gas. 

“It will be important to maintain a high savings incentive,” she said. “With a one-time payment, that would clearly be the case.

“You would have a much lower incentive to save if you lowered the price of gas by a certain percentage.”

On Thursday the Federal Network Agency warned that people in Germany are using too much gas.

“Gas consumption rose too sharply last week,” said Klaus Müller, head of the agency. 

He said gas usage among households and small firms was nearly 10 percent higher last week than the average consumption for the years 2018 to 2021.

“The situation could become very serious if we do not significantly reduce our gas consumption,” said Müller.

Meanwhile, economist Grimm slammed the time pressure that the gas price commission panel was under. The commission is to present proposal to policymakers on how a gas price brake could work in the coming days. 

“The decision to convene such a body could have been made a few months ago; after all, the development in gas prices was foreseeable,” Grimm said.

READ ALSO: German households see record hikes in heating costs 

Vocabulary 

One-time payment – (die) Einmalzahlung

Gas price cap/brake – (die) Gaspreisbremse

Significantly higher – deutlich höher 

Foreseeable – absehbar

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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