Germany

**Report: Retail Cryptocurrency Trading Status in Germany**

**Date:** April 12, 2025

**Prepared by:** Specialized Financial Regulatory Analyst

---

**Topic: Retail_Trading_Status**

**Description:** Assessment of the legal permissibility for individual citizens and residents in Germany to buy, sell, and hold cryptocurrencies, including details on the surrounding regulatory environment (e.g., licensing, KYC/AML requirements, official warnings).

---

**1. Current Status:** `Allowed-Regulated`

**2. Narrative Explanation:**

Retail trading of cryptocurrencies (buying, selling, holding) is legally permitted for individuals in Germany. However, this activity takes place within a well-defined and increasingly comprehensive regulatory framework supervised primarily by the Federal Financial Supervisory Authority (BaFin - Bundesanstalt für Finanzdienstleistungsaufsicht).

Germany has taken a proactive approach to regulating the crypto-asset sector. Cryptocurrencies are not considered legal tender but are legally classified as "units of account" (Rechnungseinheiten) and thus "financial instruments" (Finanzinstrumente) under the German Banking Act (Kreditwesengesetz - KWG). This classification brings activities related to crypto-assets under the purview of financial regulation.

Key aspects of the German regulatory landscape include:

*   **Licensing Requirement:** Entities providing crypto-related services commercially in Germany, such as exchanges, custodians (crypto custody business - Kryptoverwahrgeschäft), ATM operators, and portfolio managers, generally require a license from BaFin. This requirement was explicitly incorporated into the KWG in early 2020.
*   **AML/KYC Obligations:** Licensed crypto service providers are subject to stringent Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations, primarily outlined in the German Money Laundering Act (Geldwäschegesetz - GwG). They must implement robust Know Your Customer (KYC) procedures, monitor transactions, and report suspicious activities to the Financial Intelligence Unit (FIU). The Crypto Asset Transfer Regulation (Kryptowertetransferverordnung – KryptoWTransferV), effective since October 2021, further specifies AML requirements related to crypto transfers, aligning with the FATF's "travel rule."
*   **EU Harmonization (MiCA):** As an EU member state, Germany is subject to the Markets in Crypto-Assets Regulation (MiCA), which establishes a harmonized regulatory framework across the EU for crypto-asset issuers and service providers (CASPs). MiCA entered into full effect on December 30, 2024. Germany passed the necessary national legislation, the Act on the Digitalisation of Financial Markets (Finanzmarktdigitalisierungsgesetz - FinmadiG), in December 2024. This act, particularly through the new Crypto Markets Supervision Act (Kryptomärkteaufsichtsgesetz - KMAG), designates BaFin as the competent national authority under MiCA and facilitates the transition from the existing German licensing regime to the EU-wide MiCA framework. Germany has opted for a 12-month transition period (until December 30, 2025) for firms already licensed under German law to obtain a MiCA license.
*   **Investor Protection:** BaFin actively issues warnings to consumers regarding the high risks associated with investing in crypto-assets, emphasizing their volatility, the potential for total loss, and the need for investors to understand the underlying technology. Specific regulations also apply to certain crypto-related financial products offered to retail investors, such as restrictions on Contracts for Difference (CFDs) based on crypto-assets.
*   **Taxation:** While not directly a trading regulation, tax rules influence retail activity. In Germany, profits from selling crypto-assets held for less than one year are generally subject to income tax if they exceed a certain threshold (e.g., €1,000 exemption limit as of 2024). However, profits from crypto-assets held for more than one year are typically tax-free for individuals. Income from activities like staking or mining is also generally taxable. Accurate record-keeping and reporting are required.

In summary, German residents can freely participate in the crypto market, but the environment is strictly regulated. Service providers must adhere to licensing, operational, and AML/KYC requirements under BaFin's supervision, now operating within the overarching MiCA framework.

**3. Supporting Excerpts:**

*   **On Legality and Classification:** "Yes, it is legal, and it is a unit of account; however, it is not legal tender." (Source 4, Coinfomania) "In Germany, cryptocurrencies are classified as financial instruments or assets, making them subject to laws related to securities, commodities and investments." (Source 15, Solidus Labs)
*   **On BaFin's Role and Licensing:** "In line with the legal requirements, BaFin