Germany Proposes 25% Flat Tax on Crypto Gains to End Long-Term Holding Perk

Germany is moving to eliminate one of the most attractive tax loopholes for cryptocurrency investors in Europe. The Federal Ministry of Finance has drafted legislation that would bring digital asset gains under the 'Abgeltungsteuer,' a flat capital income tax, effectively ending the era of tax-free long-term holding.

Under the proposed rules, cryptocurrency gains would be subject to a flat 25% levy, aligning them with the tax treatment of stocks and other traditional securities. The draft specifically targets assets acquired after January 1, 2027, with the new tax regime scheduled to take effect in 2028. According to the Ministry of Finance, this shift is expected to generate approximately €350 million in additional tax revenue. A key feature of the proposal is the ability for investors to offset cryptocurrency gains against losses incurred from stocks and other securities, providing a level of portfolio flexibility previously unavailable under the private asset classification.

The End of the Holding Perk

Currently, Germany treats cryptocurrencies as private assets rather than capital investments. This distinction creates a stark divide in tax liability: gains are subject to personal income tax—which can reach up to 45%—if the assets are sold within 12 months, but they are generally tax-exempt if held for longer than a year. This 'tax-free perk' has historically positioned Germany as a premier jurisdiction for long-term "HODLers" seeking to shield their wealth from the state.

The new proposal is part of a broader action plan to combat tax fraud and ensure equity between speculative digital gains and traditional earned income. Ministry sources, via Der Spiegel, noted that taxing earned income and investment returns while allowing many speculative crypto gains to remain tax-free was "unfair."

Financialization of Digital Assets

This policy shift signals a fundamental change in how one of the world's largest economies views digital currency. By integrating crypto into the formal capital income tax system, Germany is effectively treating Bitcoin and other tokens as standard investment vehicles rather than private property. This move toward full financialization removes a primary incentive for long-term holding and brings crypto under the same regulatory and fiscal umbrella as the legacy financial system.

The scale of the opportunity for the German treasury is underscored by data from Chainalysis, which estimated that Germany generated $24.1 billion in potentially taxable on-chain cryptocurrency activity during 2025 alone.

What to Watch

As the legislation moves toward a final vote, the industry will be watching for any amendments to the January 2027 acquisition cutoff. While the draft provides a clear timeline for new purchases, the treatment of assets acquired before that date remains a critical point for existing investors. Furthermore, the success of the measure will depend on the government's ability to track on-chain activity and enforce the 25% levy across a decentralized asset class.