Digital assets in Germany

A digital asset is a value that exists only as an entry on a distributed ledger, and German law sorts it by what the entry stands for. A token that works like a bond or a fund unit is a security; under the Electronic Securities Act (eWpG) it can be issued as a crypto security in a register that a BaFin-licensed keeper runs. A token that tracks one official currency, such as a euro stablecoin, is an e-money token and may only be issued by a bank or an e-money institution. Everything else, bitcoin included, is a crypto-asset under the EU's Markets in Crypto-Assets Regulation (MiCA). The answer What are digital assets? gives the plain definitions.

Germany was early. Before MiCA, crypto-assets were already financial instruments under the German Banking Act, and holding crypto-assets or private keys for others needed a BaFin license as crypto custody business, according to BaFin's guidance notice (in German). Firms that built up under that license could move into MiCA through a simplified procedure (in German) based on BaFin's gap analysis between the two regimes.

BaFin is the competent authority for MiCA in Germany, named by the Crypto Markets Supervision Act (Kryptomärkteaufsichtsgesetz, KMAG). A firm that trades, exchanges, holds or advises on crypto-assets for customers needs its authorization, and the license then counts in every EU member state. Crypto securities registers stay under the Banking Act. The page on MiCA in Germany lists the license types and capital rules.

The Deutsche Bundesbank supports BaFin in ongoing supervision, and the Eurosystem decides how tokenized securities settle in central bank money. For a German firm with customers in Austria or Switzerland, the MiCA license covers Austria as an EU member; Switzerland follows its own law under FINMA.

The large banking groups now bring crypto into the apps people already use. DZ BANK holds a MiCAR approval for meinKrypto, a wallet in the banking app of the Volksbanken and Raiffeisenbanken. DekaBank extended its partnership with Boerse Stuttgart Digital to a retail offer for the savings banks, Ledger Insights reported, aimed at their roughly 50 million retail customers. Boerse Stuttgart Digital holds the coins in both cases, and its custody company was the first German provider with an EU-wide MiCAR license.

Behind many brokers sits a specialist. Tangany in Munich keeps crypto for more than 60 institutional clients and, through them, over 700,000 customers in Germany. Investors who prefer a listed product buy a crypto ETP on Xetra or in Stuttgart. For tokenized securities, Gubbi AG in Hamburg runs the GDX Primary Market for eWpG securities sold through financial advisers, and the neobrokers sell crypto next to shares and ETFs.

For private investors the rules come from the Federal Ministry of Finance (in German): a gain on privately held crypto is tax free when the investor sells after more than one year, and a gain within the first year is taxed as income. A crypto security under the eWpG is taxed like any other security. Reporting is becoming European: under DAC8, crypto platforms report the transactions of EU residents to the tax authorities, which share the data among member states.

Finance Loop is the meeting place for people who work on digital assets at German banks, asset managers, exchanges and fintechs. It connects the finance, IT and AI communities in Germany, Austria and Switzerland, with events in Frankfurt, Munich, Berlin and Hamburg.

In Frankfurt, Finance Loop has been a partner of the Crypto Assets Conference of Frankfurt School and Deutsche Börse Group and of the Forum für Digitale Vermögenswerte. It hosted the Digital Finance Night for banks and asset managers with digital asset strategies, is a partner of Frankfurt Digital Finance, and has a strategic cooperation with 21X, which calls itself the first fully regulated exchange in the EU for digital securities. The Frankfurt Forum on Digital Assets & Applications of d-fine brought DekaBank, 360X, 21X, Seturion and the Bundesbank together on DLT-based markets. In Munich it works with DLT Germany and W3MUC, and the Bundesblock, the German blockchain association, of which Finance Loop is a member, holds a Digital Assets Day there. In Dortmund, Finance Loop partnered with CONF3RENCE. If bitcoin is your entry point, the masterclass Bitcoin for Investors runs in Frankfurt, Munich and Berlin.

In banking, digital assets are crypto-assets, tokenized securities and stablecoins that a bank trades, holds or issues for customers. A German bank needs the matching license for each: a MiCA authorization for crypto services, a crypto securities register license for tokenized securities, and an e-money or banking license to issue a euro stablecoin.

A private investor who sells crypto after holding it for more than one year pays no income tax on the gain; a sale within one year is taxed. Tokenized securities are taxed like conventional securities. Under DAC8, platforms report customer transactions to the tax office.

MiCA covers crypto-assets and stablecoins, MiFID II and the eWpG cover tokenized securities, the DLT Pilot Regime allows blockchain trading and settlement venues, and the Transfer of Funds Regulation brings the travel rule to crypto transfers. DAC8 adds tax reporting.

The Crypto Assets Conference in Frankfurt, the Forum für Digitale Vermögenswerte in Frankfurt, the Digital Assets Day of Bundesblock in Munich and CONF3RENCE in Dortmund. Current dates are in the events calendar.