Germany is one of the countries who managed to integrate cryptocurrencies
very fast. Moreover the German authorities have succeeded in developing regulations so that the new virtual currencies to be accommodated as quickly as possible by the national legislation. When an entrepreneur decides to open a company in Germany
and to make it functional for cryptocurrency
, he must comply with the special provisions adopted by the German government related to virtual coins and transactions.
We are at your service if you want to apply for a crypto license in Germany.
The cryptocurrency sector in Germany
With a strong encouragement from the government and with an adequate legal framework, the companies registered in Germany
who perform bitcoin transactions can find in the German market a welcoming spot in which to develop and grow. The cryptocurrency transactions
in this country which hold for at least a year, benefit from tax exemptions of 25% from the usual amount taxed for capital gains.
Moreover Germany is also one of the main places in Europe where fintech companies flourish. These enterprises deal with producing innovative financial technology, which is then implemented on the cryptocurrency market.
Crypto regulations in Germany
Germany has followed the trend of other European countries and has decided to amend its anti-money laundering regulations with provisions on cryptocurrency transactions and use, instead of setting up new laws. These changes have been implemented in May 2021.
At the end of May 2021, the Ministry for Finance has also created a draft law called the Crypto Securities Transfer Regulation through which the Travel Rule was enabled. However, the rule is expected to be implemented by the end of 2023.
The Travel Rule implies setting a minimum transfer of information between companies and the German tax
authorities about the recipient engaged in cryptocurrency transactions. The minimum threshold of the transaction must be USD or EUR 1000.
The following information must be exchanged:
- - the name, address or other personal identification information (date and place of birth, for example) of the recipient;
- - the account number of the client;
- - the name of the beneficiary and his/her account number.
By account number, one must understand that the public key number must be stated.
Apart from this, foreign investors who want to open cryptocurrency companies in Germany must comply with the Company Law that enable them to operate here. Also, applying for a crypto license in Germany is possible, as until now, the Federal Financial Supervisory Authority (BaFin) has already received 25 applications, out of which it has approved 4.
Falling under BaFin’s regulations implies for all businesses dealing with virtual money to respect the Banking Act, which for the moment remains the most important law for this sector.
First steps for opening a German cryptocurrency company
The set-up of a new company in Germany
does not imply a complicated procedure. Apart from the usual registration with the Commercial Register – Handelsregistereintragung, an entrepreneur will have to invest
as well in cryptocurrency instruments
and the safety of his/her virtual transactions. The advantage of cryptocurrency
is that it is decentralized which means it is not under the control of any bank or financial institution.
Due to the popularity on the social networks, cryptocurrency companies in Germany can also be more appealing to a wider public, and your products accessible world-wide. Once the company has been registered, it is necessary to apply for crypto license in Germany.
Special requirements for cryptocurrency companies in Germany
The creation of a German cryptocurrency company
can occur under the rules of Company Act
, with the private limited liability company (GmBH) as a legal form for which the usual formalities must be completed.
Apart from these, here are the main aspects to consider in light of obtaining a German cryptocurrency license:
- the company must set in place Risk-Based Approach (RBA) policies;
- the business is also required to complete Enhanced Due Diligence (EDD) on their clients;
- just like in other countries, a Know-Your-Customer (KYC) approach must also be undertaken when filing for the license.
Compared to other countries, it is also worth noting that Germany is a member of the Financial Action Task Force (FATF), which ensures greater transparency and security for the clients of crypto businesses.
If you need more assistance in obtaining a crypto license in Germany, our specialists can advise on drafting the necessary documents for approval.
Cryptocurrency startup ideas worth considering
Cryptocurrency businesses are not only based on mining a particular currency or developing a new one. They are a complex skeleton of tasks and related functions and investors have a series of opportunities for startup ideas that will integrate with an existing or a new cryptocurrency or blockchain company.
Below are just some startup ideas for investors who wish to open a German company
and enter the cryptocurrency business:
Cryptocurrency trading: this is perhaps the most popular way to derive profits from cryptocurrencies. This involves a special cryptocurrency exchange, similar to a traditional stock exchange, or trading platform. The company in Germany can be involved in developing, designing and hosting the exchange platform.
Cryptocurrency wallet: companies can develop a wallet for cryptocurrencies, a software that will store the user’s private and public keys used to trade the crypto coins.
Mining business: companies in Germany can provide the solutions for the actual mining of cryptocurrencies. Because the demand is high, this can be a lucrative business idea.
Cryptocurrency and blockchain consulting
: this is an opportunity to expand a business for entrepreneurs in Germany who have already acquired a high level of experience in dealing with cryptocurrency. Consultants can advise other startup investors on how to use blockchain into their business
or how to explore one of the available opportunities for doing business with cryptocurrencies
Cryptocurrency hedge funds
A cryptocurrency hedge fund in Germany
will typically rely both on manual fund diversification strategies as well as automated ones, such as quantitative trading software. A characteristic of this type of fund is that investors who follow the strategies and principles used for hedge funds will attempt to reduce the investment risks and the volatility that is present on the cryptocurrency market.
Investors can choose to open a hedge fund that specializes exclusively in digital currencies or they can increase the exposure of an existing hedge fund to cryptocurrency assets.
A cryptocurrency hedge fund based in Germany can offer its services to high-net-worth individuals as well as asset managers and it can also provide corporate services as part of a separate category of activities. Over the counter cryptocurrency trading can be an example of an additional service.
Some of the main issues that need to be taken into consideration when starting this type of fund, apart from company formation in Germany, are the following:
- - the crypto assets: these can be well-known cryptocurrencies such as Bitcoin or Ether and Ripple as well as others;
- - cryptocurrency tokens: these are only used by some hedge funds and they work as a medium of exchange within certain limitations;
- - regulatory regime: Germany does not have a clear law in place for cryptocurrencies; certain Government guidelines and publications have been issued on this topic.
- - strategy: the fund manager will need to develop an investment strategy, for example a quantitative one.
Investors can contact our agents who specialize in German company formation
to find out how they can start their business plan, beginning with the creation of an investment vehicle.
Investment funds based in Germany are most often managed by a fund manager based in the country. Should you want to apply for a crypto license in Germany, feel free to address our local agents.
The use of cryptocurrencies in Germany
According to information gathered by this site
, more than 2.1 million people representing 2.62% of Germany’s total population own cryptocurrency. At the level of 2019, more than 80% of Germans had heard about cryptocurrencies. However, the tendency to own virtual money is present mostly among wealthy persons, as follows:
- - 67% of the persons participating in the study reported to have an annual income over EUR 800,000;
- - 44% of them reported to have incomes between EUR 200,000 to EUR 800,000;
- - by age, the largest number of crypto owners was in the 18 – 24 group, with 18% of the respondents;
- - 15% of them are aged 25 to 34.
Feel free to contact
one of our experts in company formation in Germany
to speed up the procedure of setting up a cryptocurrency business or a cryptocurrency hedge fund
in this country.