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Germany

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#323
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Archived
Created
2025-06-26 09:20
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Initial Research

Executive Summary

In Germany, individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies under a comprehensive regulatory framework. The Federal Financial Supervisory Authority (BaFin) primarily oversees this activity, treating crypto assets as financial instruments under the German Banking Act (KWG) since January 2020. Germany actively implements EU directives like MiCA, requiring crypto-related businesses to obtain licenses and adhere to strict AML/KYC procedures. Existing nationally licensed entities have a transition period until December 31, 2025, to obtain a MiCA-compliant license.

Key Pillars

The key regulatory pillars in Germany's crypto framework include: (1) BaFin as the primary regulator overseeing crypto activities. (2) Licensing requirements for crypto-related services, mandating authorization from BaFin with specific capital and AML/KYC requirements. (3) Strict KYC/AML compliance, aligning with EU AML Directives and the German Money Laundering Act (GwG), obligating CASPs to verify customer identities, monitor transactions, and report suspicious activities.

Landmark Laws

  • German Banking Act (Kreditwesengesetz - KWG): Classified crypto assets as financial instruments in January 2020, requiring licensing for related services.
  • Markets in Crypto-Assets Regulation (MiCA): EU regulation establishing a harmonized framework for crypto assets, with rules regarding authorization and supervision of CASPs fully applicable from December 30, 2024. Germany is actively implementing MiCA with a transition period for existing entities until December 31, 2025.
  • Act on the Digitalisation of the Financial Market (Finanzmarktdigitalisierungsgesetz - FinmadiG) and Act on the Supervision of Markets for Crypto-Assets (Kryptomärkte-Aufsichtsgesetz - KMAG): National legislation assigning responsibilities to BaFin and facilitating the transition to the MiCA regime.

Considerations

  • Crypto assets are classified as financial instruments under the German Banking Act (KWG).
  • Profits from crypto trading are subject to income tax, treated as "private economic goods" under § 23 EStG. Short-term gains (assets held less than a year) are taxable above an exemption limit (€1,000 from 2024), while long-term gains are generally tax-free for private investors.
  • Investor protection and financial stability are significant drivers for regulation.
  • EU's new Anti-Money Laundering Authority (AMLA), to be based in Frankfurt, will further shape AML/CFT supervision.

Notes

  • Germany has been relatively crypto-friendly due to early efforts to provide legal clarity.
  • The implementation of the EU's Fifth Anti-Money Laundering Directive in 2020 led to the formal definition of crypto assets and licensing requirements for custody providers.
  • The German Electronic Securities Act (eWpG) of June 2021 enabled the issuance of crypto securities.
  • BaFin updated its Interpretation and Application Guidance (AuA) on the Geldwäschegesetz (Money Laundering Act).
  • The regulatory framework is dynamic, with ongoing adjustments to national laws and the implementation of EU regulations like MiCA.

Detailed Explanation

Germany legally permits individual citizens and residents to buy, sell, and hold cryptocurrencies, with this activity regulated by the Federal Financial Supervisory Authority (BaFin). Since January 2020, Germany has classified crypto assets as financial instruments under the German Banking Act (Kreditwesengesetz - KWG), necessitating licenses for businesses providing related services, such as exchanges and custodians. BaFin supervises companies offering crypto-related services, including trading platforms, crypto ATMs, and crypto custody businesses. The German Electronic Securities Act (eWpG) of June 2021 has further enabled the issuance of crypto securities.

The regulatory environment is heavily influenced by European Union directives, notably the Markets in Crypto-Assets Regulation (MiCA). MiCA, fully applicable from December 30, 2024, establishes a harmonized framework for crypto assets across the EU. Germany is actively implementing MiCA through national legislation like the Act on the Digitalisation of the Financial Market (Finanzmarktdigitalisierungsgesetz - FinmadiG) and the Act on the Supervision of Markets for Crypto-Assets (Kryptomärkte-Aufsichtsgesetz - KMAG), assigning responsibilities to BaFin and facilitating the transition to the MiCA regime. Existing nationally licensed entities have until December 31, 2025, to obtain a MiCA-compliant license.

Key regulatory aspects include licensing requirements for companies offering crypto-related services, strict KYC/AML procedures aligning with EU AML Directives and the German Money Laundering Act (Geldwäschegesetz - GwG), and investor protection measures. BaFin requires exchanges and CASPs to verify customer identities, monitor transactions, and report suspicious activities. The EU's new Anti-Money Laundering Authority (AMLA), to be based in Frankfurt, will further shape AML/CFT supervision. BaFin has updated its Interpretation and Application Guidance (AuA) on the Geldwäschegesetz (Money Laundering Act).

Profits from cryptocurrency trading are subject to income tax in Germany. Cryptocurrencies are treated as "private economic goods" under § 23 EStG. Short-term gains (assets held for less than a year) are taxable at the individual's progressive income tax rate if they exceed an exemption limit (increased to €1,000 from 2024). Long-term gains (assets held for more than a year) are generally tax-free for private investors holding the crypto assets directly. Income from staking and mining also has specific tax implications and exemption limits.

Historically, Germany has been considered relatively crypto-friendly. The implementation of the EU's Fifth Anti-Money Laundering Directive in 2020 led to the formal definition of crypto assets and licensing requirements for custody providers. As stated by BaFin on January 3, 2025, MiCAR applies to "natural and legal persons and certain other companies that are involved in the issuance, offer to the public and admission to trading of crypto-assets or that provide services related to crypto-assets in the EU." According to Wyden on January 22, 2025, “Since January 2020, crypto-asset businesses in Germany have been obliged to apply for a domestic CASP license via BaFin... While MiCA allows for an 18-month transition period, Germany aims to conclude the transition within 12 months by December 30, 2025. All German CASPs must have a full MiCA license by this date.”

Summary Points

Retail Cryptocurrency Trading Status in Germany (June 26, 2025)

Overall Status: Allowed-Regulated

I. Regulatory Bodies and Roles

  • Federal Financial Supervisory Authority (BaFin):
    • Primary regulatory body overseeing crypto activities.
    • Responsible for licensing and supervising Crypto Asset Service Providers (CASPs).
    • Enforces AML/KYC regulations.
    • Provides guidance on crypto regulations and taxation.
    • Has expanded supervisory responsibilities under MiCA.
  • Federal Ministry of Finance (BMF):
    • Issues guidance on the income tax treatment of crypto assets.
  • European Union (EU):
    • Sets overarching regulatory framework through directives like MiCA and AML Directives.
  • EU's Anti-Money Laundering Authority (AMLA):
    • To be based in Frankfurt, will further shape AML/CFT supervision.

II. Key Legislation and Regulations

  • German Banking Act (Kreditwesengesetz - KWG):
    • Classifies crypto assets as financial instruments since January 2020.
    • Requires businesses providing crypto services to obtain a license from BaFin.
  • Markets in Crypto-Assets Regulation (MiCA):
    • EU regulation establishing a harmonized framework for crypto assets.
    • Full applicability of rules regarding CASP authorization and supervision effective from December 30, 2024.
    • Introduces transparency requirements and consumer protection rules.
  • Act on the Digitalisation of the Financial Market (Finanzmarktdigitalisierungsgesetz - FinmadiG):
    • National legislation facilitating the transition to the MiCA regime.
  • Act on the Supervision of Markets for Crypto-Assets (Kryptomärkte-Aufsichtsgesetz - KMAG):
    • National legislation assigning responsibilities to BaFin and facilitating the transition to the MiCA regime.
  • German Money Laundering Act (Geldwäschegesetz - GwG):
    • Implements EU AML Directives (5th and 6th AMLD).
    • Requires crypto exchanges and other CASPs to implement KYC/AML procedures.
  • German Electronic Securities Act (eWpG):
    • Enabled the issuance of crypto securities in June 2021.

III. Requirements for Compliance

  • Licensing:
    • Companies offering crypto-related services (exchanges, custody, trading platforms) must obtain authorization from BaFin.
    • Requirements include minimum capital, local presence, and robust AML/KYC procedures.
    • Existing nationally licensed entities have a transition period (generally until December 31, 2025) to obtain a MiCA-compliant license.
  • KYC/AML:
    • Strict Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements are in place.
    • Obliged entities must verify customer identities, monitor transactions, and report suspicious activities.
    • BaFin has been updating its guidance on these matters, emphasizing increased scrutiny for Virtual Asset Service Providers (VASPs).
  • Investor Protection:
    • Transparency requirements for the issuance and trading of crypto-assets.
    • Rules for consumer protection.
  • Taxation:
    • Profits from cryptocurrency trading are subject to income tax.
    • Cryptocurrencies are generally treated as "private economic goods" ("private Veräußerungsgeschäfte" under § 23 EStG).
    • Short-term gains (assets held for less than a year) are taxable at the individual's progressive income tax rate if they exceed an exemption limit (€1,000 from 2024).
    • Long-term gains (assets held for more than a year) are generally tax-free for private investors holding the crypto assets directly.
    • Income from activities like staking and mining also has specific tax implications and exemption limits.
    • Record-keeping obligations for crypto investors have been emphasized.

IV. Notable Restrictions or Limitations

  • Comprehensive regulatory framework requires compliance with licensing, KYC/AML, and taxation rules.
  • Transition period for existing CASPs to obtain MiCA-compliant licenses (generally until December 31, 2025).

V. Recent Developments or Changes

  • Full applicability of MiCA rules from December 30, 2024.
  • Germany actively implementing MiCA through national legislation.
  • BaFin has expanded supervisory responsibilities under MiCA.
  • Updated guidance from the German tax office on crypto transactions, including the use of advanced tools and the EU's DAC-8 directive.
  • Increased scrutiny for Virtual Asset Service Providers (VASPs) regarding AML/KYC.

Full Analysis Report

Report on Retail Cryptocurrency Trading Status in Germany

Date of Report: June 26, 2025

Topic: Retail_Trading_Status

Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

Retail_Trading_Status: Germany

Identified Status: Allowed-Regulated

Narrative Explanation:

Individual citizens and residents in Germany are legally permitted to buy, sell, and hold cryptocurrencies. This activity is subject to a comprehensive regulatory framework overseen primarily by the Federal Financial Supervisory Authority (BaFin). Germany has been proactive in classifying and regulating crypto assets, treating them as financial instruments under the German Banking Act (Kreditwesengesetz - KWG) since January 2020. This classification means that businesses providing services related to cryptocurrencies, such as exchanges and custodians, generally require a license from BaFin.

The regulatory landscape in Germany is significantly influenced by European Union directives, most notably the Markets in Crypto-Assets Regulation (MiCA). MiCA, which establishes a harmonized framework for crypto assets across the EU, has been progressively coming into force, with full applicability of rules regarding the authorization and ongoing supervision of Crypto Asset Service Providers (CASPs) effective from December 30, 2024. Germany has been actively implementing MiCA, with national legislation like the Act on the Digitalisation of the Financial Market (Finanzmarktdigitalisierungsgesetz - FinmadiG) and the Act on the Supervision of Markets for Crypto-Assets (Kryptomärkte-Aufsichtsgesetz - KMAG) assigning responsibilities to BaFin and facilitating the transition to the MiCA regime. Existing nationally licensed entities have a transition period, generally until December 31, 2025, to obtain a MiCA-compliant license.

Key aspects of the German regulatory environment for retail crypto trading include:

  • Licensing: Companies offering crypto-related services, such as exchanges, custody, and trading platforms, must obtain authorization from BaFin. This involves meeting specific requirements, including minimum capital, establishing a local presence, and having robust AML/KYC procedures.
  • KYC/AML: Strict Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements are in place, aligning with EU AML Directives (like the 5th and 6th AMLD) and the German Money Laundering Act (Geldwäschegesetz - GwG). Crypto exchanges and other CASPs are obliged entities and must verify customer identities, monitor transactions, and report suspicious activities. BaFin has been updating its guidance on these matters, emphasizing increased scrutiny for Virtual Asset Service Providers (VASPs). The EU's new Anti-Money Laundering Authority (AMLA), to be based in Frankfurt, will further shape AML/CFT supervision.
  • Investor Protection: A significant driver for regulation in Germany and the EU is the protection of investors and maintaining financial stability. MiCA, for instance, introduces transparency requirements for the issuance and trading of crypto-assets and rules for consumer protection.
  • Taxation: Profits from cryptocurrency trading are subject to income tax in Germany. Cryptocurrencies are generally treated as "private economic goods" ("private Veräußerungsgeschäfte" under § 23 EStG). Short-term gains (assets held for less than a year) are taxable at the individual's progressive income tax rate if they exceed an exemption limit (increased to €1,000 from 2024). Long-term gains (assets held for more than a year) are generally tax-free for private investors holding the crypto assets directly. Income from activities like staking and mining also has specific tax implications and exemption limits. The Federal Ministry of Finance (BMF) issues guidance on the income tax treatment of crypto assets, with updates reflecting the evolving market, such as differentiating between active and passive staking and addressing DeFi. Record-keeping obligations for crypto investors have also been emphasized.

Historically, Germany has been considered relatively crypto-friendly due to its early efforts to provide legal clarity. The implementation of the EU's Fifth Anti-Money Laundering Directive in 2020 led to the formal definition of crypto assets and licensing requirements for custody providers in Germany. The German Electronic Securities Act (eWpG) of June 2021 further enabled the issuance of crypto securities.

While the regulatory framework is comprehensive, it is also dynamic, with ongoing adjustments to both national laws and the implementation of overarching EU regulations like MiCA. This ensures that Germany remains a regulated yet evolving market for retail cryptocurrency trading.

Relevant Text Excerpts and Sources:

  • BaFin on Crypto Asset Services under MiCAR (January 3, 2025): "The regulation [MiCAR] has been fully applicable since 30 December 2024 and applies to natural and legal persons and certain other companies that are involved in the issuance, offer to the public and admission to trading of crypto-assets or that provide services related to crypto-assets in the EU."

    • Source URL: https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/Fachartikel/2025/fa_bj_2501_MiCAR_Dienstleistungen_en.html (Note: While the search result mentions a guidance note from Jan 3, 2025, the provided Bird & Bird link refers to this BaFin guidance. The direct BaFin link for this specific guidance might differ but the content is reflected in reputable secondary sources.)

  • TradingView on German Crypto Regulations (June 23, 2025): "As of 2025, Germany is implementing MiCA rules while tightening AML/CFT compliance." And, "Crypto trading and holding are legal in Germany, as the government has provided a set of rules to operate any crypto-related activity. Germany's main focus for implementing a structured approach is to ensure investors' protection and financial stability."

    • Source URL: https://www.tradingview.com/news/u_today:897710138009-crypto-regulations-in-germany-2025/

  • Koinly on Legality and Taxation (2025): "Yes, cryptocurrency is legal in Germany. The BaFin crypto regulations and KWG (German Banking Act) state individuals and businesses may buy, sell, and trade cryptocurrencies." "Under updated guidance from 2025, the German tax office confirmed it was deploying advanced tools to analyze crypto transactions, as well as utilizing the EU's DAC-8 directive."

    • Source URL: https://koinly.io/guides/crypto-tax-germany/

  • Wyden on MiCA Transition (January 22, 2025): "Since January 2020, crypto-asset businesses in Germany have been obliged to apply for a domestic CASP license via BaFin... While MiCA allows for an 18-month transition period, Germany aims to conclude the transition within 12 months by December 30, 2025. All German CASPs must have a full MiCA license by this date."

    • Source URL: https://www.wyden.io/insights/navigating-germanys-mica-transition-for-crypto-businesses

  • IDnow on BaFin Regulation (Undated, context implies recent): "Cryptocurrency trading and exchanges are regulated by BaFin, which requires all cryptocurrency exchanges operating in Germany to be licensed to comply with KYC and AML regulations."

    • Source URL: https://www.idnow.io/blog/cryptocurrency-in-germany/

  • BaFin on its Supervisory Role: "In line with the legal requirements, BaFin supervises companies active in Germany that provide services related to crypto assets. This includes crypto trading platforms, firms that operate crypto ATMs and companies that conduct crypto custody business or operate crypto securities registers." "At the beginning of 2020, the legislature incorporated crypto assets and crypto custody business into the German Banking Act (Kreditwesengesetz – KWG )."

    • Source URL: https://www.bafin.de/EN/DieBaFin/AufgabenGeschichte/DLTBlockchainKryptoAssets/dlt_blockchain_kryptowerte_node_en.html

  • Sumsub on AML/KYC (May 1, 2025): "Since January 1, 2020, crypto assets have been considered financial instruments by BaFin. Therefore crypto businesses now fall under BaFin's supervision and must comply with all AML and KYC requirements." "The German financial regulator BaFin, for example, recently updated its Interpretation and Application Guidance (AuA) on the Geldwäschegesetz (Money Laundering Act)... This constitutes Germany's new approach to Know Your Customer (KYC) checks, risk management, and obligations to file Suspicious Activity Reports (SARs)."

    • Source URL: https://sumsub.com/blog/aml-kyc-guide-germany/

  • Charltons Quantum on BaFin's expanded responsibilities under MiCAR (February 21, 2025): "The announcement clarifies that BaFin now holds expanded supervisory responsibilities under MiCAR. While some regulatory aspects were previously covered under the Germany Banking Act (Kreditwesengesetz – KWG), MiCAR brings additional provisions and harmonised supervision across the European Union. CASPs, including crypto custodians, operators of crypto-asset trading platforms, and firms offering advisory, transfer, or portfolio management services for crypto-assets, now fall under BaFin's oversight."

    • Source URL: https://charltonsquantum.com/germanys-bafin-announces-new-regulatory-framework-for-crypto-asset-service-providers-in-view-of-micar/

Direct URL Links to Primary and Reputable Secondary Sources:

  • BaFin - Activities relating to DLT, blockchain and crypto assets: https://www.bafin.de/EN/DieBaFin/AufgabenGeschichte/DLTBlockchainKryptoAssets/dlt_blockchain_kryptowerte_node_en.html
  • BaFin - Services and activities in connection with crypto-assets in accordance with MiCAR (Updated May 27, 2025): https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/Meldung/2024/meldung_2024_07_31_MiCAR_Roadmap_en.html (Note: The provided search result indicates a page updated May 27, 2025, and mentions FAQs and guidance. The exact URL from the snippet points to a roadmap, but BaFin's website would be the primary source for such guidance.)
  • Koinly - Crypto Tax Guide Germany 2025: https://koinly.io/guides/crypto-tax-germany/
  • TradingView / u.today - Crypto Regulations in Germany 2025 (June 23, 2025): https://www.tradingview.com/news/u_today:897710138009-crypto-regulations-in-germany-2025/
  • Wyden - Navigating Germany's MiCA Transition for Crypto Businesses (January 22, 2025): https://www.wyden.io/insights/navigating-germanys-mica-transition-for-crypto-businesses
  • IDnow - Cryptocurrency in Germany: Is it regulated and safe?: https://www.idnow.io/blog/cryptocurrency-in-germany/
  • AInvest - Germany Implements MiCA Regulation for Crypto Assets in 2025 (June 23, 2025): https://www.ainvest.com/news/germany-implements-mica-regulation-for-crypto-assets-in-2025-2641000287/
  • Bird & Bird - BaFin publishes guidance note on crypto asset services according to MiCAR (January 16, 2025): https://www.twobirds.com/en/insights/2025/germany/bafin-publishes-guidance-note-on-crypto-asset-services-according-to-micar
  • Charltons Quantum - Germany's BaFin Announces New Regulatory Framework for Crypto-Asset Service Providers in view of MiCAR (February 21, 2025): https://charltonsquantum.com/germanys-bafin-announces-new-regulatory-framework-for-crypto-asset-service-providers-in-view-of-micar/
  • Sumsub - The Essential AML/KYC Guide to Germany (2025) (May 1, 2025): https://sumsub.com/blog/aml-kyc-guide-germany/
  • Regulated United Europe - Crypto License in Germany 2025: https://rue.ee/en/blog/post/crypto-license-in-germany
  • Blockpit - Crypto Taxes in Germany: Complete Guide (April 24, 2025): https://blockpit.io/en/crypto-tax-guide/germany/
  • Gesetze im Internet - Kreditwesengesetz (KWG): https://www.gesetze-im-internet.de/kwg/ (Primary source for German Banking Act)
  • Gesetze im Internet - Geldwäschegesetz (GwG): https://www.gesetze-im-internet.de/gwg_2017/ (Primary source for German Money Laundering Act)
  • EUR-Lex - Regulation (EU) 2023/1114 (MiCA): https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32023R1114 (Primary source for MiCA)

Web Sources (21)

Sources discovered via web search grounding

Search queries used (7)
  • Retail cryptocurrency trading Germany regulation 2025
  • BaFin cryptocurrency regulation Germany
  • MiCA implementation Germany status 2025
  • KYC/AML cryptocurrency Germany 2025
  • Are German citizens allowed to buy and sell cryptocurrency?
  • German crypto license requirements
  • Taxation of cryptocurrency Germany retail investors
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