Core Aspects of the New Regulation
New Category of so-called Tauschkryptowerte
The draft introduces the new tax category of Tauschkryptowerte, which, according to the explanatory memorandum of the law, is intended to include in particular Bitcoin and Ethereum. For Tauschkryptowerte acquired or received after December 31, 2026, profits and ongoing income will in the future generally be considered capital income. Capital gains would thus be taxable regardless of the holding period, generally at a tax rate of 25% plus solidarity surcharge (Solidaritätszuschlag) and, where applicable, church tax (Kirchensteuer). A withholding tax on capital income (Kapitalertragsteuerabzug) by domestic crypto service providers is to take effect from January 1, 2028.
Existing positions are largely protected. For Tauschkryptowerte acquired by December 31, 2026, the previous regime continues to apply, under which capital gains remain tax-free after one year. However, according to the draft, lending and staking rewards received after 2026 will constitute newly acquired crypto-assets (Neubestand) even if the coins used are existing holdings (Altbestand). Unresolved issues remain with gratuitous acquisitions, the division of identical coins into Altbestand and Neubestand, as well as the proof and liquidity risks associated with the planned tax deduction.
Change of Regime
In the future, capital gains from new Tauschkryptowerte will fall under capital income. As a result, the taxation regime of other income (sonstige Einkünfte) and, in particular, the tax exemption after a one-year holding period will no longer apply to these holdings. A gain would be taxable even after five, ten, or twenty years. Conversely, instead of the personal progressive income tax rate, the tax rate for capital income of 25% will generally apply.
This systemic change creates different winners and losers: Long-term investors lose the previous possibility of complete tax exemption after one year. Short-term traders may benefit if their gains were previously taxed at a personal marginal tax rate above 25%. Additionally, losses incurred by short-term traders may be usable in a broader loss offsetting category (Verlustverrechnungskreis).
Thus, the change in regime does not necessarily promote long-term holding from a tax perspective. In fact, it may even reduce the tax burden on short-term trading profits compared to the previous law. So far, no one from the political sphere has been able to explain why this fundamental shift in the tax burden – from speculators and short-term traders to long-term investors – should lead to a “fairer” system.
Protection of Existing Holdings
The new substantive rules will first apply to Tauschkryptowerte acquired or received after December 31, 2026. For existing holdings (Altbestände), the rules for private sale transactions will generally continue to apply. According to the current draft bill, existing holdings that are already tax-exempt will remain tax-exempt upon sale. Even for existing holdings whose one-year period has not yet expired by January 1, 2027, tax exemption may still apply after the expiration of the previous one-year period.
There will be no step-up for existing holdings. The historical acquisition and the previous holding period remain decisive. Structurally, this model resembles the introduction of the final withholding tax (Abgeltungsteuer) for private equity investments in 2009. As a result, there will permanently be two different tax regimes, tied to the date of acquisition or receipt. However, this protection of existing holdings is currently only part of the draft bill from the German Federal Ministry of Finance (BMF) and is not yet legally secured. Approval by the Cabinet as well as majorities in the Bundestag and Bundesrat are still required.
Lending, Passive Staking, and Transaction Processing
Capital income will not only include capital gains but also income from the transfer of Tauschkryptowerte and from participation in transaction processing activities. This primarily refers to classic lending and passive staking.
Of particular importance: According to the draft bill, lending or staking rewards received after December 31, 2026, even from existing holdings, will be considered Neubestand. The underlying existing holdings will generally remain subject to the old regime.
Numerous detailed questions in the DeFi sector remain unresolved, such as those concerning liquid staking, DeFi pools, wrapped assets, timing of receipt, and the distinction from commercial transaction processing.
Gratuitous Acquisition and Acquisition Costs of Zero Euros
Tauschkryptowerte acquired gratuitously or for services not taxed under the new regime will be recorded with acquisition costs of zero euros. The draft bill primarily targets airdrops and bounties, aiming to defer taxation until the time of sale.
However, the wording is broader. It covers, in principle, any gratuitous acquisition and does not include an explicit so-called step-into-the-shoes doctrine (Fußstapfentheorie) for gifts or inheritances. Since the transitional rule also refers to “acquisition” after December 31, 2026, there is significant interpretative risk: If a Bitcoin acquired by the end of 2026 is gifted or inherited in 2027, the wording could classify it as Neubestand with acquisition costs of zero euros for the recipient. Whether this is actually intended cannot be determined from the explanatory memorandum. It would contradict the traditional concept of continuing the acquisition date and acquisition costs of the legal predecessor. This issue should be explicitly clarified during the legislative process. For private estate planning, it is one of the most important open questions.
Loss Offset
Losses from the Neubestand will be accounted for within the system of capital income. As a result, they can generally be offset against other positive capital income and carried forward. However, a carry-back to the immediately preceding year, which was previously possible, is no longer provided for in the new system.
Losses from existing holdings (Altverluste), on the other hand, will remain in the previous Verlustverrechnungskreis. The draft bill does not include a transitional rule allowing losses incurred before the system change to be offset against gains from new Tauschkryptowerte for a limited period. This distinguishes the draft bill from the transitional provisions introduced with the Abgeltungsteuer in 2009.
In practice, this creates at least two separate “loss worlds”: on the one hand, losses from existing holdings and other private sale transactions, and on the other hand, losses from new Tauschkryptowerte and other capital income.
Capital Gains Tax Deduction Only from 2028
The substantive tax rules will take effect from January 1, 2027. However, the Kapitalertragsteuerabzug by crypto service providers will only be introduced from January 1, 2028. Entities required to deduct tax will include domestic crypto asset service providers or operators, as well as domestic branches or permanent establishments of foreign providers, insofar as they pay out or credit the relevant income.
For 2027, this means that gains and income from the Neubestand will generally not yet be taxed at source. They must therefore be declared in the assessment procedure.
Even from 2028 onward, tax deduction will not be comprehensive. In cases of Self-Custody, DeFi, or foreign platforms without a domestic paying agent, the obligation to declare will remain with the taxpayer. The phrase “Abgeltungsteuerlike with stocks” is therefore only partially accurate. The division between domestic deduction cases and foreign or decentralized assessment cases will likely involve significant additional administrative effort, which the German Federal Ministry of Finance has so far underestimated or deliberately accepted.
Crypto-to-Crypto Exchange
In discussions about the draft bill, it is occasionally claimed that the taxation of crypto-to-crypto exchanges remains completely unresolved. However, from a substantive legal perspective, the text of the law clearly indicates that realization will continue to apply: the draft bill generally covers the gain from the “disposal” of Tauschkryptowerte. The term “disposal” has, in the past, also included crypto-to-crypto exchanges according to the tax courts and tax authorities.
Additionally, the draft bill provides for tax deduction in procedural terms, even for capital gains not consisting of cash. The explanatory memorandum explains that the entity required to deduct tax must be able to liquidate a portion of the crypto assets used in the exchange to pay the tax in euros. Thus, crypto service providers are effectively turned into crypto traders themselves. However, practical questions regarding operational valuation, the assumed order of disposal, and the specific implementation of tax deduction will continue to occupy practitioners for some time.
Alternative Tax Base of 50% of the Proceeds
If the platform does not know the acquisition costs and acquisition date, it may generally rely on information provided by the taxpayer, unless there is contradictory data. If this information cannot be used, it will be assumed for tax deduction purposes that the coins were acquired after December 31, 2026. The tax deduction will then be based on 50% of the total sale proceeds.
The 50% figure is not a final material fiction of profit. An excessive deduction can generally be corrected in the assessment procedure. Nevertheless, it creates significant liquidity risk. Transfers from Self-Custody wallets or from foreign platforms to a German platform subject to deduction are particularly affected.
Fiscal Impact and Incomplete Impact Assessment
The draft bill anticipates the following additional revenue for the state as a whole: 2027: €0, 2028: €160 million, 2029: €305 million, 2030: €325 million, 2031: €350 million. These figures are significantly lower than those rumored during the spring budget debate, which were reportedly in the billions annually.
The compliance burden for citizens, businesses, and administration, as well as additional costs, are still marked as “to follow” in the draft bill. The regulations are to be evaluated six years after coming into force.
Key Points of Contention
The crypto community and tax experts have several questions for the German Federal Minister of Finance. While the generous transitional rules have provided some relief – fears were worse – substantive, constitutional, and tax policy issues must still be addressed during the legislative process:
Unequal Treatment Compared to Gold and Foreign Currencies
The draft bill justifies classifying Tauschkryptowerte as capital income due to their speculative use, high liquidity, lack of depreciation, and increasing use as capital investments. However, these characteristics equally apply to physical gold and non-interest-bearing foreign currency holdings, which continue to be classified as other assets and fall under private sale transactions.
Both the BFH (German Federal Fiscal Court) and the BMF (German Federal Ministry of Finance) have previously structurally compared crypto assets to foreign currencies, classifying them as other assets under other income.
The central constitutional question, therefore, is whether this distinction is consistent and sufficiently justified on substantive grounds. According to the Bundesverfassungsgericht (German Federal Constitutional Court), the legislature enjoys a wide margin of appreciation and discretion in typification and design. Nevertheless, it must be explained why the mentioned characteristics justify permanent taxation for Bitcoin but not for economically comparable assets.
Improving Enforcement vs. Changing Substantive Tax Law
With DAC8, CARF, and the Kryptowerte-Steuertransparenz-Gesetz, reporting and information obligations for crypto service providers have been significantly expanded. There are now comprehensive reporting requirements for crypto transactions and international information exchange designed to improve tax authorities’ access to data from foreign providers. The “fruits” of these reporting obligations have yet to be realized, as these regimes have only just been introduced. Data evaluation is expected by mid-2027.
If the core problem of crypto taxation is an enforcement and information deficit, this can be addressed through reporting data and improved documentation standards. It does not necessarily follow that the one-year holding period exemption must also be abolished. At the same time, the Kapitalertragsteuerabzug does not solve the enforcement problem for Self-Custody, DeFi, or foreign platforms.
Gifts and Inheritance
The current wording of the draft bill poses problems for gratuitous transfers. Without clarification, an acquisition by gift or inheritance after 2026 could be treated as a new acquisition and recorded with acquisition costs of zero euros. This could undermine the protection of existing holdings held by the legal predecessor.
What is needed is an explicit provision stating that, in cases of Gesamtrechtsnachfolge (universal succession) and unentgeltlicher Einzelrechtsnachfolge (gratuitous individual succession), the acquisition date and acquisition costs of the legal predecessor are to be continued, possibly linked to special documentation requirements.
Permanently Parallel Tax Worlds
An identical coin may be subject to different rules depending on its acquisition date. Depending on the acquisition and disposal dates, the following may vary: type of income, tax rate, holding period, Verlustverrechnung (loss offset), reporting obligation, tax deduction, and possibly the order of disposal.
This becomes particularly complex when existing holdings and Neubestände are mixed in the same wallet, staked, lent, bridged, or used in DeFi protocols. The federal government is expected to specify the valuation and disposal order through a legal ordinance at a later date. The draft bill does not yet provide a final solution to this. Postponing and shifting these already evident practical problems into the future falls far short of the high standard expected from a forward-thinking and shaping legislator.
50% Alternative Tax Base
The alternative tax base is particularly vulnerable due to its liquidity impact and its level. It can trigger a high provisional deduction even in cases of low actual profit or tax-exempt existing holdings. Furthermore, the draft bill does not explain why the alternative tax base for Tauschkryptowerte should be 50% of the proceeds rather than a lower flat rate. While taxpayers can correct the amount later, they must initially provide liquidity and prove the actual history. As a result, the protection of existing holdings effectively depends on reliable documentation.
What Investors Should Do Now
The draft bill is not yet law. Investors should therefore neither sell solely based on the political debate nor blindly invest all available funds in crypto before the end of the year. The current state of legislation and individual risk-bearing capacity must be assessed separately from tax planning.
Secure Tax History and Data Now
Regardless of the outcome of the legislative process, complete documentation is the most important step. Blockchain transparency alone does not replace the tax-relevant allocation. Investors should secure data such as purchase dates, acquisition costs, exchanges or wallets used, crypto-to-crypto exchanges, as well as lending and staking transactions. Manual adjustments to tax reports and report settings should also be documented in a traceable manner.
In cases of long-term Self-Custody, documentation should not be reconstructed only when transferring to a German platform later on. Without verifiable proof, the 50% alternative tax base could apply from 2028.
Purchases Before the Deadline
If a position is to be built up for economic reasons anyway, acquiring it by December 31, 2026, could be tax-advantageous under the current draft bill, as it may still be sold tax-free after the previous one-year period.
However, investors should note that the protection of existing holdings is not yet finalized. Taxes are not everything in life – the market price can fluctuate more than any potential tax advantage.
Avoid Accidentally Changing the Regime
The question of when a new acquisition occurs must now be considered more carefully than before in every technical transfer process. Whether technical migrations or certain wrapping processes actually constitute a disposal is not yet clarified for many scenarios and often depends on the individual case. Therefore, especially with larger existing holdings, it should be examined before implementation whether the identity of the asset is maintained or whether a taxable exchange must be assumed.
Plan for Tax Liquidity
From 2027 onward, new Tauschkryptowerte may generate taxable gains, even though no automatic Kapitalertragsteuerabzug (capital gains tax deduction) is planned for 2027. Investors should therefore reserve liquidity for income tax payments and, where applicable, advance payments.
From 2028 onward, it should also be taken into account that platforms may make significant withholding tax deductions if data is missing. In the case of crypto-to-crypto transactions, the draft bill even allows the entity required to deduct tax to liquidate crypto assets or withdraw them from the account to pay the tax in euros.