German Parliament Plans to Offer Tax-Free Crypto Staking and Lending
Cryptocurrency regulations in Europe are changing, and some countries are taking individual measures to create a friendly regulatory framework. Germany has announced a new policy that could transform the regulatory framework and support growing cryptocurrency adoption.
Germany eases taxes for crypto staking and lending
Germany is setting the pace in Europe to support friendly crypto 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 in selling the crypto gains derived from staking and lending initiatives. It will now be possible for German investors to derive gains from staking and lending activities. Therefore, Germans will have a chance to sell their cryptocurrencies at zero taxes after one year of lending and staking.
Germany’s Federal Ministry of Finance also announced plans to eliminate the draft bill that needed at least a decade of tax-free selling of cryptocurrency gains from lending and staking activities. The country is also planning to implement a law that will be friendly to cryptocurrency transactions.
A member of parliament in Germany, Frank Schaffler, posted a tweet on April 29 addressing the recent policy by 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 on a network for a stipulated period. The users then earn interest for these staked cryptocurrencies. On the other hand, lending allows borrowers to use cryptocurrencies as collateral to borrow funds.
The German members of parliament have now announced that they will progress with the move to maintain the holding period to one year. If investors hold their crypto gains from staking and lending activities for one year, they will not be required to pay any taxes.
Before this amendment, investors were required to hold their crypto gains for at least ten years to enjoy zero taxes. This is quite a long time, leading to many users having to pay these taxes. Moreover, staking and lending are usually for a stipulated period, where the stakes will be liquidated before the 10-year period expires.
Section 23 of the German Income Tax Act requires that capital gains be held for an extended period to benefit from free taxes. This tax law provision reads that “In the case of economic goods within the meaning of sentence I, from 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 leading crypto hub
Germany is currently ahead of Singapore in terms of having a friendly regulatory framework for cryptocurrencies. Singapore is currently an attractive destination for cryptocurrency firms, but the strict regulations have hindered much progress.
In Germany, the level of cryptocurrency adoption has more than doubled. This is because of a friendly regulatory framework pushing investors in the country to move toward the buzzing crypto sector.
A series of banks in Germany are also starting to look toward fintech blockchain applications to allow people to buy and sell cryptocurrencies. Last week, Commerzbank, the largest bank in Germany, applied for a license to trade and take custody of crypto assets. The license was granted by BaFin.
Cryptocurrency startups have also sprouted in Germany. Additionally, several companies in the country have launched crypto and Bitcoin exchange-traded products (ETPs) amid a rise in institutional demand for cryptocurrencies.