Cryptocurrency regulations in Europe are evolving, and some countries are taking individual steps to create a user-friendly regulatory framework. Germany has announced a new policy that could transform the regulatory framework and support the growing adoption of cryptocurrency.
Germany Eases Taxes for Crypto Staking and Lending
Germany is leading the way in Europe to support crypto-friendly regulations. The German parliament has agreed on a new set of cryptocurrency taxes. The country has announced that it will strengthen crypto-friendly laws.
Germany will not increase the period to allow users to access free taxes by selling crypto earnings derived from staking and lending initiatives. It will now be possible for German investors to profit from staking and lending activities. Therefore, Germans will have the opportunity to sell their cryptocurrencies tax-free after a year of lending and staking.
The German Federal Ministry of Finance also announced its intention to scrap the bill that required at least a decade of tax-free sale of cryptocurrency earnings from lending and staking activities. The country is also planning to implement a law that will be favorable to cryptocurrency transactions.
A German MP, Frank Schaffler, published a Tweeter April 29 addressing the recent policy of the German parliament to remove this tax on different activities related to decentralized finance (DeFi).
Staking and lending are two of the most popular investments in the DeFi sector. In staking, users lock their cryptocurrencies to a network for a stipulated period. Users then earn interest for these staked cryptocurrencies. On the other hand, loans allow borrowers to use cryptocurrencies as collateral to borrow funds.
German MPs have now announced that they will pursue the decision to keep the detention period at one year. If investors keep their crypto earnings from staking and lending activities for one year, they will not be required to pay taxes.
Prior to this amendment, investors were required to hold their crypto earnings for at least ten years to benefit from zero taxes. It is quite long, which forces many users to pay these taxes. Also, staking and lending is usually for a stipulated period, where the stakes will be liquidated before the 10-year period expires.
Section 23 of the German income tax law requires capital gains to be held for an extended period to qualify for tax exemption. This provision of the tax law states that “In the case of economic assets within the meaning of sentence I, the use of which as a source of income is generated at least in one calendar year, the period increases to ten years”.
Germany’s plans to become a top crypto hub
Germany is currently ahead of Singapore in terms of cryptocurrency-friendly regulatory framework. Singapore is currently an attractive destination for cryptocurrency businesses, but strict regulations have hindered much progress.
In Germany, the level of cryptocurrency adoption has more than doubled. This is due to a user-friendly regulatory framework that drives investors in the country to turn to the buzzing crypto sector.
A series of banks in Germany are also starting to turn to fintech blockchain apps to allow people to buy and sell cryptocurrencies. Last week, Commerzbank, Germany’s largest bank, applied for a license to exchange and take custody of crypto assets. The license was granted by BaFin.
Cryptocurrency startups have also sprung up in Germany. Additionally, several companies in the country have launched crypto and bitcoin exchange-traded products (ETPs) amid rising institutional demand for cryptocurrencies.