a crypto hub progression to watch closely

Germany, one of Europe’s largest economies, is arguably not considered a particularly pro-Bitcoin country. However, the country has been positive about investments in the blockchain and crypto sector for years by enacting increasingly progressive legislation. In addition, Germany has the largest number of Bitcoin nodes worldwide, second only to the United States, reflecting a strong commitment to blockchain and the crypto industry in general.

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Previously, Germany, like Portugal, had implemented a national blockchain initiative. Within this framework, 44 concrete measures have been developed to unlock the benefits of blockchain technology. As of January 2020, the country has authorized banks and financial institutions to offer crypto asset custody services: the license is issued by the country’s regulatory body, the BaFin (theFederal Financial Supervisory Authority), which is obviously accompanied by high legal requirements and the application of standards comparable to those of traditional financial markets.

In 2021, new legislation allowed “special funds”, administrators of institutional investment funds, to allocate up to 20% of their portfolios to crypto assets: this initiative was considered a huge step forward that strongly legitimizes crypto assets as investment tools. In the same year, the German government made explicit mention of the blockchain and crypto sectors in a program underlining its commitment to creating a digital state: the government agreed to also make Germany one of the key locations in Europe for fintech platforms such as for consumer-oriented financial applications (eg. Robin Hood), which allows you to trade stocks and other investment options. A notable paragraph contains a provision to allow the issuance of tokenized shares if the previous government ofAngela Merkel had already passed a law that ended the requirement to have a paper certificate for the sale of a security, openly to promote the use of blockchain in the country.

One of the most recent major changes in favor of the crypto industry is the adoption of a measure that will allow holders of cryptocurrencies to be tax-exempt on the sale of crypto assets, provided a year has passed between the date of purchase and date of sale. Previously, cryptocurrencies that were resold or put on strike had to be kept for a period of 10 years before they could be exempted.

All these positive developments should not make us forget that the new government has stated in a document that it intends to “constructively support the process of introducing a digital euro alongside cash, accessible to all as legal tender in Europe for general use”. This 24 page document covers many topics related to the crypto space such as mining, staking and token airdrops.

The impact of these regulations on the growth of the crypto sector is already a cause for concern. As is often the case in many countries, poorly enforced regulations can backfire on the crypto ecosystem, especially if regulators fail to take suggestions from industry players into account. Given the ever-changing landscape of the industry, regulators are feeling their way and how they deal with new issues that arise will be crucial for the future of this industry.

Many certainly remember the virulent comments of the German Chancellor Olaf Scholzwhen he was finance minister, about Scale : “(…) Germany and Europe cannot and will not accept their entry into the market until regulatory risks have been adequately addressed.” He also added: “We must do everything we can to ensure that the monopoly on the currency remains in the hands of the States.”

Nevertheless, current crypto-friendly policies, extensive regulation and slow but still growing adoption of blockchain technology and the crypto industry could make Germany one of the most important blockchain business hubs in Europe. Berlin, the German capital, is also one of the main places where it is possible to issue cryptocurrencies.

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