What caused Germany to become the most attractive country for cryptocurrency investments?
In Q1 2022, Coincub named Germany the most crypto-friendly nation in its guide to the top ten most crypto-friendly countries. The European country permits usage of cryptocurrencies by its long-term domestic savings sector, which is aided by its zero-tax policy on long-term capital gains from cryptocurrency and second only to the United States in terms of number of Bitcoin and Ethereum nodes.
Adoption of Blockchain
In 2019, Germany was the first to adopt a blockchain strategy to use the technology’s potential for digital transformation and help make it an attractive hub for blockchain, Web3, and metaverse development in financial services, climate science, business and government tech.
German Savings Banks joined the fray by developing fintech blockchain applications to enable consumers to buy and sell cryptocurrencies.
NFT, metaverse, Web3, govtech and crypto payment apps developed by companies such as Volkswagen, About You, SAP, BrainBot, and BigchainDB are widely used in e-commerce to purchase items.
Roundhill Investments, an ETF sponsor focused on breakthrough thematic funds, introduced the Roundhill Ball Metaverse UCITS ETF on the Deutsche Börse Xetra as Germany’s first metaverse exchange-traded fund to finance the development of these technologies.
Furthermore, the Fund Location Act of Germany allows pension funds, insurance companies, family offices, and corporate investment vehicles to invest up to 20% of their assets in digital assets.
Adoption of Crypto
Approximately 2.6% of Germans have invested in cryptocurrency as of the end of 2021. According to a recent study from KuCoin, 44 percent of Germans are interested in investing in cryptocurrencies.
Investors from Germany can get involved with crypto and blockchain via firms and platforms such as 1inch Exchange, Nuri, FinLab, Minespider, the NAGA Group, Tangany, Coindex, CryptoTax, Upvest, Fiona , Blocksize Capital etc. or they may purchase goods on Sugartrends using Dash.
Germany is one of the world’s top 10 countries for crypto mining, and it has Europe’s largest mining firm, Northern Data — which is largely fueled by environmentally friendly power. As a company, crypto mining is taxed.
With the help of fintech angel investor Christian Angermayer’s Apeiron Investment Group, Berlin-based Denario and Penta, as well as Cologne-based Nextmarket and Frankfurt-based Northern Data have all settled in Germany’s crypto capital of Berlin.
Paycer, a Hamburg-based fintech firm specializing in cryptocurrencies and decentralized finance, is working on a bridge protocol that will combine DeFi and cross-chain crypto services with traditional banking offerings.
While Forget Finance, a fintech startup based in Berlin, focuses on encouraging young people to save and invest in cryptocurrency using online coaching delivered by a combination of AI bots and real financial experts.
Central Bank Digital Currency
According to a study from the German Bundesbank, consumers’ use of cash in point-of-sale transactions has decreased from 74% in 2017 to 60% in 2020.
The EU-wide banking regulator, the Bundesbank, is currently working on distributed ledger technology asset settlements. Meanwhile, the European Central Bank has been researching and developing a CBDC known as the digital euro.
According to the ECB, recent studies conducted on behalf of the bank, based on interviews with EU citizens’ panels, have highlighted security and worldwide acceptance as key issues.
NFTs and the Metaverse
The metaverse is the next stage of Web3, with ramifications for how we communicate, socialize, work, enjoy video games, fund organizations, purchase and sell nonfungible tokens, and attend live events like concerts, sports games and conferences.
The ZKM Center for Art and Media in Karlsruhe acquired a number of NFTs in 2017, considerably ahead of the craze that will start in 2021, and it is now displaying pieces from its own collection as well as private lenders on an outdoor cube-shaped screen called the “ZKM Cube.”
Regulation of Digital Assets
The German government is one of the few in Europe that has started to regulate cryptocurrencies ahead of the EU’s Markets in Crypto Assets, or MiCA, regulations.
According to Robin Matzke, a lawyer and blockchain expert who advised the German Bundestag, anyone who controls private keys on behalf of others and serves the German market must obtain a license from the Federal Financial Supervisory Authority, regardless of whether they hold other similar licenses in other EU countries.
The EU’s new Transfer of Funds Regulation also has rules for “unhosted” wallets, or crypto wallets not operated by a custodian or centralized exchange. Lone Fønss Schrøder, CEO of the blockchain company Concordium, explained:
CEO of the blockchain company Concordium, Lone Fønss Schrøder, explained:
“The new draft regulations require significant changes in the way current cryptocurrency transfers are made. It may be a huge challenge for the decentralized crypto solutions that hold anonymity as a core value and are committed to peer-to-peer (P2P) and self-custody. Moreover, many projects could be held back by their community from changing their solutions.”