Germany’s planned crypto taxation changes are drawing criticism from industry participants over concerns about their impact on everyday investors.
The proposed framework introduces stricter reporting requirements and higher tax exposure for some crypto holders.
Circle executive Patrick Hansen said the rules could create unexpected financial pressure for users who lack detailed purchase records. The debate highlights growing concerns around compliance challenges as Germany prepares a new approach to taxing digital assets.
Circle raises concerns over Germany crypto tax proposal
Patrick Hansen, Circle’s director of EU strategy and policy, warned that Germany’s proposed 50% crypto tax rule could significantly affect retail investors who cannot prove their acquisition costs. He argued that the measure may force ordinary users to pay taxes on gains they did not actually make.
Germany’s draft framework includes a default 50% tax base for crypto holdings where investors fail to provide credible proof of purchase. Hansen said this requirement could affect users who are unaware of the regulatory changes or cannot reconstruct their transaction history.
“This will hit normal consumers/investors particularly hard,” Hansen wrote on X. He added that many people may have purchased cryptocurrencies with limited profits or even losses, making the proposed assumption problematic.
The Circle executive said the rule could lead tax authorities to treat crypto assets acquired after 2026 as taxable under a presumed value increase. He argued that assuming assets have doubled in value may create situations where investors pay taxes on unrealized or nonexistent gains.
Hansen also questioned whether the assumption matches recent crypto market performance. He pointed to Bitcoin’s yearly decline and weaker altcoin performance as reasons why many investors may not experience the gains expected under the proposed framework.
Dr. David Hötzel, associate partner at law firm Poellath, also raised concerns about the 50% baseline. He said the figure is not finalized but warned that such a measure could create a large upfront tax burden for trades that generated only small profits.
Hötzel added that protecting existing holdings would depend heavily on investors maintaining reliable documentation of their transactions.
Germany crypto tax rules increase record-keeping requirements
Record-keeping is expected to become a central issue under Germany’s proposed crypto tax framework. The Finance Ministry requires taxpayers to maintain details including acquisition dates, purchase amounts, costs, transaction fees, and the platforms or wallets used.
Investors may need exchange records, tax documents, and personal transaction spreadsheets to verify their crypto purchase history. This could create challenges for users who traded across multiple platforms or moved assets into self-custody wallets.
The proposed rules would apply to cryptocurrencies purchased after December 31, 2026. Holdings acquired before January 1, 2027, would generally remain under the existing system, according to the reported draft.
The new withholding tax mechanism would reportedly begin in 2028. As a result, investors may need to separate older holdings from new purchases while maintaining detailed records for future tax reporting.
Germany’s government is also considering a flat 25% tax on crypto capital gains. With the solidarity surcharge of 5.5%, the combined tax rate would reach 26.375%.
Under the proposed system, Bitcoin and Ethereum gains would face taxation, while some assets such as NFTs, certain stablecoins, security tokens, and real-world asset tokens would remain exempt.
The new framework would also change the treatment of long-term crypto holdings. Currently, German retail investors can generally avoid tax on crypto gains when they sell assets after holding them for more than one year.
If approved, future purchases after December 31, 2026, would lose that exemption. A €100,000 Bitcoin gain, for example, could result in about €26,375 in taxes under the proposed flat rate and solidarity surcharge.
Germany’s government estimates that the crypto tax changes could generate €160 million in revenue during 2028. The figure could rise to €350 million annually by 2031, according to projections.
