Germany is known as one of the top cryptocurrency-friendly countries in the world. Here, we explain its reason and everything you need to know about investing in cryptocurrencies in Germany.
First, note that this article provides general information about cryptocurrency regulation in Germany. We strongly recommend contacting an accountant or financial expert to obtain financial advice tailored to your circumstances. The EU financial regulators have warned that most cryptocurrency-related assets are too risky and speculative.
At first glance, it seems strange that Germany is a digital currency paradise. Only 17% of people invest in Germany, which is much lower than the percentage seen in other countries. It can partly justify Germany’s reputation as the land of risk-averse savers.
Cryptocurrency, often abbreviated as Crypto, is considered by many investment analysts to be one of the riskiest and most volatile investments a person can make.
In addition, concerns have been raised regarding the environmental impact of digital currencies.
These days, there are many different types of digital currencies in the market. What all have in common is that they are digital and secured using encryption, meaning no one can forge them.
Even the largest and most well-known international digital currencies (Bitcoin, Ethereum, Ripple) are prone to sudden increases and sharp drops in value. Also, some digital currencies like LUNA have already crashed completely in this market.
National stereotypes aside, Germany has some of the most favorable laws in the world for investing in these risky assets.
Read more at Wise Business Group: What you need to know about investing in Germany!
Coincub, a cryptocurrency exchange comparison site, recently named Germany one of the top cryptocurrency-friendly countries in the world, making up the top three countries along with Singapore and the United States of America.
The main reason is the favorable German tax laws in this field. If a person in Germany sells a common stock or an ETF asset at a higher price than he paid to buy it, the brokerage automatically withholds 25% of his profit for tax.
But following new tax guidelines issued by Germany’s Federal Ministry of Finance, some digital currency gains will not be taxed. The ministry has confirmed that gains of less than €600 in digital currencies will not be taxed.
More importantly, another directive stipulates that if a person in Germany holds digital currency for at least a year, no matter how much profit they make when selling it, they will face no tax.
One of the reasons why cryptocurrency laws are so favorable in Germany is political.
The Free Democrats in Germany tend to attract a significant number of votes from people who are more likely to hold digital currencies.
While the Free Democrats party (FDP) is in a three-way coalition with the progressive Social Democrats (SPD) and the Greens, FDP leader Christian Lindner holds the German finance ministry.
In the 2021 election campaign, Lindner devoted a large part of the FDP platform and coalition negotiations to regulating and attracting investments in cryptocurrency.
Someone who runs the cryptocurrency YouTube channel Modern Investor, a channel with over 225,000 subscribers, says:
“In my opinion, the German government knows better than most countries how to make money from digital currencies.”
He further mentions that many people globally are active in the digital currency market. If these people choose Germany as a place to live due to favorable conditions for investing in cryptocurrencies, they spend their money on German supermarkets and use German services.
Therefore, the money that the German government loses through taxation based on the laws passed in cryptocurrencies goes directly back into the system.
Also, if digital currencies continue to grow globally, Germany will eventually be recognized as a genius that discovered how to attract this type of investment and keep it within its borders.
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Crypto investment is still a virgin situation in Germany. Only 17% of Germans are active in the stock market, around 2.6% of whom own digital currencies.
Crypto investors in Germany tend to be young, with one-third aged 34 or younger. The more income a person has, the more likely they are to invest in the digital currency market. Two-thirds of crypto investors in Germany have an annual income of €800,000 or more.
A small percentage of people in Germany have invested in cryptocurrencies, and this investment type has a limited niche. However, this limit niche is still great within the cryptocurrency community itself.
About 9% of the world’s Bitcoin nodes are in Germany. The cryptocurrency nodes are computers that provide a secure list of transactions using that currency in a digital ledger known as the blockchain.
Also, 14% of the world’s Ethereum nodes, another prominent cryptocurrency, are in Germany. From this point of view, Germany ranks second only to the United States of America.
Although crypto asset ownership in Germany is still limited, the crypto investor community is visible enough to make others curious. It is true even of the traditional risk-averse savings banks, or Sparkassen, where many Germans put their savings.
According to the Association of Savings Banks in Germany, about 10% of the regular customers of these banks currently have digital currency assets. It causes banks to provide an opportunity for their customers to invest directly through their current accounts in a digital currency wallet.
Many online brokerages popular with German investors, such as Trade Republic, Scalable, and DKB, also offer clients digital currency wallets alongside their options for buying traditional products such as stocks and ETFs.
Also, people can easily buy and sell cryptocurrencies with a few simple clicks using the smartphone applications provided by these brokerages.
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According to YouTuber Modern Investor, Germany’s favorable regulations and tax benefits for crypto investment are part of a culture that increasingly sees digital currencies as another normal part of the investment landscape.
While suspicion of digital currencies is still high internationally, Germany has accepted that they exist and are here to stay. Therefore, it has decided to take advantage of them.
Germany is one of the few countries that has enacted laws for cryptocurrencies. Therefore, many international crypto investors immigrated to Germany and chose the country as a safe investment option.
Many countries around the world have no regulations regarding cryptocurrencies. It makes everything in the field of crypto investment even more ambiguous and less predictable.
If any of these countries, for example, China or the United States, ban crypto trading, what will happen to investors?
However, people know it is not going to happen in Germany. It is the result of establishing clear and favorable rules for crypto investment in this country.
Digital currencies or Crypto is one of the riskiest and most volatile investments a person can make.
Previously known as the land of risk-averse savers, Germany has become a safe place to invest in cryptocurrencies. The reason is the establishment of favorable tax laws in this area.
According to new guidelines issued by Germany’s Federal Ministry of Finance, profits of less than €600 in digital currency trading are not taxed. In addition, if a person keeps a cryptocurrency for at least one year, it will be tax-free when selling it.
Germany is one of the few countries that has enacted laws for investing in cryptocurrencies and is trying to take advantage of it by attracting and maintaining this type of investment within its borders.
Therefore, a large number of crypto investors in the world have chosen Germany as a safe investment option and immigrated to this country.
Read the translation of this article in Persian, here.
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