Germany is the most cryptocurrency-friendly country, the journey from skepticism to enthusiasm for cryptocurrencies: ¿what has allowed Germany to become the most attractive country for cryptocurrency investments?
In her monthly Expert Take column, international tax lawyer and CPA Selva Ozelli addresses the intersection between emerging technologies and sustainability, providing the latest developments in taxes, AML/CFT regulations, and legal issues affecting cryptocurrencies and blockchain.
Germany rose to the top of Coincub’s guide to the most cryptocurrency-friendly countries in the first quarter of 2022. The European country allows its long-term national savings sector to use cryptocurrency investments, backed by its zero. tax. crypto policy, and its number of Bitcoin and Ethereum nodes is second only to the United States.
In 2019, Germany was the first country to adopt a blockchain strategy to harness the technology’s potential to promote digital transformation and help make it an attractive center for the development of blockchain, Web3 and metaverse. applications in fintech, climate tech, business and govtech. including Germany’s digital identities project.
The German Savings Bank Association, a network of 400 savings banks in German-speaking countries, has begun developing blockchain fintech apps to allow customers to buy and sell cryptocurrencies. Several companies such as Volkswagen, About You, SAP, BrainBot and BigchainDB have been developing NFT, metaverse, Web3, govtech and crypto payment apps that are widely used in e-commerce for buying goods. Jacopo Visetti, a consultant at C3, a team of traders and investors who support companies working to reduce emissions, quoted:
“C3 is a climate technology company developing an advanced technological infrastructure that allows carbon credits of international standards to be attached to blockchain through tokenization”.
To fund the development of these technologies, Roundhill Investments, an ETF sponsor focused on innovative thematic funds, launched the Roundhill Ball Metaverse UCITS ETF on Deutsche Börse Xetra, describing it as Germany’s first Metaverse exchange-traded fund. In addition, Germany’s Fund Allocation Act allows pension funds, insurers, family offices and corporate investment funds to allocate up to 20 percent of their assets to digital assets.
Adoption of cryptography
By the end of 2021, approximately 2.6% of Germans used cryptocurrencies. And according to a recent KuCoin report, 44% of Germans are motivated to invest in cryptocurrencies.
German investors can get involved with cryptocurrencies and blockchain through companies and platforms such as 1inch Exchange, Nuri, FinLab, Minespider, NAGA Group, Tangany, Coindex, CryptoTax, Upvest, Fiona, Blocksize Capital, USDX Wallet, Bitbond and Iota Foundation. or they can buy from Sugartrends using Dash. Mark Mason, Business Relations and Communications Manager at Dash, commented:
“Dash is an alternative cryptocurrency that offers financial freedom without borders. Accelerate financial inclusion by allowing people to use their phones as bank accounts. It’s decentralized, permissionless and resistant to censorship.”
Germany is among the top 10 countries for cryptocurrency mining and is home to the European Union’s largest mining company, Northern Data, which runs almost entirely on renewable energy. Crypto mining is taxable as a business.
Numerous blockchain startups have set up shop in Germany’s crypto capital Berlin, with Apeiron Investment Group, from fintech angel investor Christian Angermayer, backing Berlin-based Denario and Penta, as well as Cologne-based Nextmarket and Frankfurt-based Northern Data.
Paycer, a Hamburg fintech specializing in cryptocurrencies and decentralized finance, is developing a bridge protocol that will aggregate DeFi and cross-chain crypto services and combine them with traditional banking services.
Berlin-based financial technology startup Forget Finance, on the other hand, focuses on motivating young people to save and invest in cryptocurrencies by providing online training through a combination of AI bots and real financial experts.
Central bank digital currency
According to a survey by the Deutsche Bundesbank, Germany’s central bank, the proportion of cash payments in point-of-sale transactions by German consumers fell from 74 percent in 2017 to 60 percent in 2020. accounting technology. asset settlements. Meanwhile, the European Central Bank is exploring the creation of a CBDC, called the digital euro. A recent survey commissioned by the ECB, based on discussions with panels of EU citizens, emphasizes security and universal acceptance as major concerns.
Non-fungible Tokens and the Metaverse
The metaverse is the next wave of Web3, changing the way we interact, socialize, work, play video games, fund charities, buy and sell non-fungible tokens, and attend concerts, sporting events, and conferences. In 2017, the ZKM Center for Art and Media in Karlsruhe acquired a number of NFTs, long before the 2021 craze, and now exhibits works from its own collection and private lenders in the “ZKM Cube,” an open-air. public. visible cube-shaped canvas. Margit Rosen, head of ZKM’s collections, archives and research department, shared the details with me in an interview.
Since the start of the NFT mania, German sportswear company Adidas has partnered with Bored Ape Yacht Club and Prada for a climate-focused charity NFT art project on the Polygon blockchain to raise awareness. In addition, German automotive company Volkswagen launched a successful interactive NFT advertising campaign.
Brian Shuster, founder and CEO of Utherverse, said:
“Utherverse has been building and operating an online virtual world community where one can socialize in real time, attend events and start a business, since 2005. Utherverse has combined the best of the Internet, gaming and virtual reality for the best experience. of the metaverse. For example, Secret City is a game developed by Utherverse Digital Inc. with 81% of its users in Germany. Having developed over 100 patents and pending patents for core Internet and metaverse technologies, we are the undisputed leader of the metaverse architecture and virtual reality economy. There is a lot of noise related to the metaverse and, frankly, most companies claiming to offer properties and tokens have dangerously underestimated the complexity of the task at hand. Almost every company that has tried to make a metaverse work has failed. The third generation of the Utherverse and its utility token are expected to be introduced in the second quarter of 2022.”
Illicit use of cryptography
Germany is a member of Europol’s Joint Cybercrime Action Task Force, which works to combat transnational cybercrime. According to a Europol report from 2022:
“The use of this virtual currency for criminal activities and money laundering has grown in recent years in terms of volume and sophistication. […] The criminal use of cryptocurrencies is no longer limited to cyber criminal activities, but is now related to all types of crimes that require the transmission of monetary value.”
After receiving a tip, Germany’s Federal Criminal Police Office, or Bundeskriminalamt, took down the servers of Hydra, the world’s largest illegal dark web marketplace. Hydra has facilitated more than $5 billion in Bitcoin (BTC) transactions since its launch. Germany’s action was followed by the U.S. Treasury Department issuing sanctions against Hydra in a coordinated international effort aimed at “stopping the proliferation of malicious cybercrime services, dangerous drugs, and other illegal offerings” available through the site. based in Russia.
Gurvais Grigg, CTO of Public Sector at Chainalysis, mentioned:
“Hydra’s withdrawal is notable not only because it was the largest darknet marketplace in operation, but also because it offered money laundering services that allowed the conversion of cryptocurrencies into Russian rubles.”
“Along with sanctions against Garantex, Suex and Chatex last year, government agencies clearly target retirement points that cybercriminals use for ransomware, black market sales, scams and potentially sanctions evasion.”
Regulating digital assets
Germany is one of the few countries in Europe that began regulating cryptocurrencies prior to the European Union’s Crypto Asset Markets Regulation, or MiCA. According to Robin Matzke, a lawyer and blockchain expert who advised the German Bundestag, Germany’s cryptocurrency custody regulations require that those who control private keys on behalf of others and serve the German market receive a license from the Federal Financial Supervisory Authority, regardless of whether they have other similar licenses in the EU.
The new EU Funds Transfer Regulations also provide disclosure rules for “non-hosted” wallets or cryptocurrency wallets not managed by a centralized custodian or exchange. Lone Fønss Schrøder, CEO of blockchain company Concordium, explained:
“The new draft regulations require significant changes to the way current cryptocurrency transfers are done. It could be a big challenge for decentralized crypto solutions that maintain anonymity as a core value and are committed to peer-to-peer (P2P) and self-custody. In addition, the community may prevent many projects from changing their solutions.”