Germany Implements MiCA Regulation for Crypto Assets in 2025

Germany has been actively working on establishing a comprehensive regulatory framework for digital assets and cryptocurrencies, recognizing their growing popularity and the need to maintain financial stability and protect investors. As of 2025, the country is implementing the Markets in Crypto-Assets Regulation (MiCA) while tightening Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) compliance.

The Federal Ministry of Finance (BMF) published an updated circular on March 6, 2025, outlining key changes in the income tax treatment of crypto assets. The term “virtual currencies and other tokens” has been replaced with “crypto assets,” and there is now a differentiation between active and passive staking for tax purposes. The circular also addresses the tax implications for decentralized finance (DeFi) for the first time, introduces new requirements for transaction overviews and tax reporting, and provides clearer guidelines for valuing crypto assets, including the use of daily market rates. Additionally, the circular emphasizes documentation and retention obligations for taxpayers, with transitional rules applying for tax years up to and including 2024 to help taxpayers adapt to the new provisions.

On February 18, 2025, a legal analysis highlighted the impact of the new Act on the Digitalisation of the Financial Market (Finanzmarktdigitalisierungsgesetz, FinmadiG) and the Act on the Supervision of Markets for Crypto-Assets (Kryptomärkte-Aufsichtsgesetz, KMAG). These acts introduce transitional provisions for crypto service providers, allowing for a smooth application of MiCAR in Germany. Existing licenses remain valid until December 31, 2025, under a grandfathering regime, giving providers time to transition to MiCAR-compliant licenses.

The Free Democratic Party of Germany has called for the creation of a Strategic Bitcoin Reserve, although it is not yet regulated. The Federal Financial Supervisory Authority (BaFin) plays a crucial role in regulating crypto activities, including licensing and enforcement of AML and CFT rules, blockchain-based lending through the German Banking Act, and prohibiting any illicit activity in the crypto space.

In terms of crypto tax, Germany does not acknowledge cryptocurrencies as stocks but rather as ‘private economic goods,’ meaning capital gains tax does not apply. Income tax on cryptocurrency ranges from 0% to 45%, depending on the total income. Gains from crypto trading are exempted from tax up to 1000€ per year, and income from staking and mining is free up to an exemption limit of 256€ per year. The last date for the 2024 tax return is July 31, 2025, with an extended deadline of April 30, 2026, if the tax return is prepared by tax advisors.

Crypto service providers in Germany require a BaFin-authorized license to operate, including custody hold and crypto assets service providers (CASP) licenses. To obtain a license, crypto businesses must register with BaFin, establish a local presence in Germany, hold minimum capital (€125,000 to €350,000), and comply with AML and KYC regulations. At least one member of the business must be a resident of the EU.

By 2025, around 27.32 million Germans will use cryptocurrency, representing 32.84% of the population, indicating an increase in adoption from previous years. The revenue in the crypto market in Germany is projected to reach US$2.5 billion in 2025, with an annual growth rate of 16.33% expected, resulting in US$2.9 billion by 2026. The German government sold its entire crypto holdings in mid-2024 and does not hold any cryptocurrency as of 2025.

Germany’s regulatory approach aims to ensure investors’ protection and financial stability, making it one of the most crypto-friendly countries in the European Union. If Germany maintains this stability in the crypto space, it can position itself as the crypto leader in the EU.