Debate Ignited over Green’s Crypto Tax Exemption Proposal in Germany

The discussion on taxing cryptocurrencies in Germany is becoming more intense as Alliance90/The Greens, the Green parliamentary group in the Bundestag, seeks to eliminate a tax exemption that favors cryptocurrency investments. Currently, in Germany, taxes on cryptocurrencies are determined by how long an investor has held their crypto. After holding crypto for one year, private investors can realize tax-free trading profits. This one-year period was established to encourage long-term investments and increase Germany’s appeal as a location for crypto investors. The Greens argue that this exemption period is unfair, as other financial instruments are subject to a flat 25% capital gains tax, regardless of the duration of ownership.

The proposal put forth by the Greens has sparked discussions about its potential impact on investment culture, tax fairness, and the administration of crypto transactions. Sabine Grützmacher, a member of the Bundestag for the Greens, defends the proposal and argues for equal conditions for different investment options. She believes that all capital investment classes, including crypto assets, should have comparable conditions. While the Greens classify crypto tokens as capital investments similar to stocks or gold, they also recognize the need for consumer protections due to the high volatility of crypto values.

Grützmacher emphasizes that the proposal is still under consideration and that any changes would likely include a cut-off date. Crypto assets purchased before this date would still be eligible for tax-free trading, even after the new law takes effect. Not everyone agrees with the Greens’ argument that crypto should not be exempt from taxes. Ulli Spankowski, founder of the crypto trading app Bison, believes that the current classification of crypto assets in the German tax code is clear. Crypto assets are considered “other economic goods” and are thus eligible for tax-free trading after one year, similar to physical gold. Spankowski believes that abolishing the one-year holding period would negatively impact the investment climate in Germany.

Frank Schäffler, a member of the Bundestag for the Free Democratic Party (FDP), agrees that eliminating the holding period would complicate the tax system and discourage long-term investments. He suggests simplifying capital formation and rewarding long-term investments by increasing the tax exemption limit. It is unlikely that the Greens will be able to pass the proposal without the support of the FDP and SPD, the other parties in the governing coalition. The coalition is currently experiencing a growing rift between the Greens and the FDP, making it challenging to reach agreements on various policy issues.

Even if the Greens manage to pass the measure, the impact on German markets and investing may be limited. While the popularity of cryptocurrencies among German investors is growing, the overall rate of investment in Germany is still relatively low compared to other European countries. Simply abolishing the tax exemption may not incentivize a more active investment culture. Ulli Spankowski suggests that the government can create incentives for investors through tax breaks and education initiatives. He believes that promoting a sensible investment culture in Germany requires cooperation between the government, financial industry, and educational institutions.