Taxation of Crypto Assets Held as Private Assets
Crypto assets held as private assets are generally treated as private disposal transactions according to the case law of the Bundesfinanzhof (BFH, Federal Fiscal Court) and the view of the tax authorities. The relevant provisions are § 22 Nr. 2 EStG (German Income Tax Act) in conjunction with § 23 Abs. 1 Satz 1 Nr. 2 EStG (German Income Tax Act). If the one-year disposal period is exceeded, any increase in value is not taxable under this system.
This classification means that currency tokens are ultimately treated like gold, precious metals or other speculative assets. The view taken in the original article calls this equivalence into question. According to that view, currency tokens, in terms of their economic function and market behavior, show parallels to shares rather than to gold.
A distinction is made for current income from lending. In the case of non-redeemable tokens such as Bitcoin, according to the discussed case law of the Finanzgericht Köln (Cologne Fiscal Court), there is no monetary capital claim. In the case of fiat-backed stablecoins, this may be assessed differently insofar as there is an enforceable claim to redemption in money.
Starting Point: Dual-Track Taxation of Crypto Assets
Currency Tokens as Other Assets
In its judgment of 14 February 2023, the Bundesfinanzhof (BFH, Federal Fiscal Court) held that currency tokens may constitute assets. It classified capital gains from currency tokens held as private assets as private disposal transactions. The decisive factor was a broad concept of an asset, which, in addition to objects and rights, also includes pecuniary advantages if they can be valued independently and the taxpayer incurs expenses to acquire them.
The BFH also relied on structural comparability with foreign currencies. Foreign currency balances can also be the subject of private disposal transactions. The tax authorities adopted this approach in the BMF-Schreiben (Federal Ministry of Finance circular) of 6 March 2025 and classified crypto assets on a function-based basis, in particular as currency tokens, utility tokens, security tokens and stablecoins.
According to this view, § 23 EStG applies to currency tokens held as private assets. Security tokens with a legal position similar to securities, by contrast, may fall under § 20 Abs. 1 or Abs. 2 EStG (German Income Tax Act), depending on their structure.
Significance of the One-Year Period
The decisive point under § 23 EStG is the one-year period under § 23 Abs. 1 Satz 1 Nr. 2 Satz 1 EStG. Gains within this period are subject in full to the progressive income tax rate if the tax-free threshold of EUR 1,000 is exceeded. After expiry of the period, by contrast, there is no taxability.
Even the exchange of one token for another token may be treated as an acquisition and disposal transaction. This creates a large number of possible realization events within the one-year period. After expiry of the period, by contrast, complete non-taxability occurs.
The tax authorities expressly do not apply the extension of the period to ten years where the asset is used as a source of income pursuant to § 23 Abs. 1 Satz 1 Nr. 2 Satz 3 EStG to crypto assets. This shows that the speculative logic of § 23 EStG appears to be only of limited viability for tokens.
Value Judgment Through Classification Under § 23 EStG
The classification of Bitcoin and comparable currency tokens as other assets can be justified, in terms of the statutory criteria, under the case law described above. They can be valued independently, are transferable and are marketable. However, the application of § 23 EStG also entails an evaluative classification.
For tax purposes, currency tokens are thereby placed close to gold, precious metals, jewelry and collectibles. The key question, however, is whether this economic equivalence is convincing. According to the analysis put forward in the original article, in terms of market behavior and economic substance the currency token is closer to a share than to a gold bar.
This classification entails significant tax differences:
- Gains from currency tokens are not taxable after expiry of the one-year period.
- Gains from shares are taxable under § 20 Abs. 2 EStG irrespective of the holding period.
- Short-term gains from currency tokens may be subject to the progressive tax rate.
- Gains from shares are generally covered by the separate flat tax rate.
- Losses from currency tokens are likewise disregarded after expiry of the period.
Business Assets: No Tax-Free Holding Period
Recognition as Intangible Assets
As business assets, crypto assets must be recognized as non-depreciable intangible assets. Depending on their function, they are to be allocated to fixed assets or, as a rule, to current assets. In particular, the general profit determination and valuation provisions of §§ 4, 5, 6 and 15 EStG are decisive.
Increases in value are taxable as business assets without any holding period. Decreases in value can have an effect only subject to the requirements for a write-down to the lower going-concern value under § 6 Abs. 1 Nr. 2 Satz 2 EStG.
Difference Between Private and Business Assets
The same asset class is therefore treated differently depending on whether it is allocated to private assets or business assets. As business assets, it is fully captured for tax purposes; as private assets, non-taxability may arise after twelve months.
This different treatment is not in itself contrary to the system. It is based on the dualism of income categories under income tax law. However, the need for justification increases where privately held currency tokens are treated differently from structurally similar private financial investments.
Incoherence of the Current Classification
Capital Investments Under § 20 EStG
Since the 2008 Business Tax Reform, capital gains from capital investments have been taxed under § 20 Abs. 2 EStG irrespective of any holding period. Shares and other capital investments within the meaning of § 20 EStG are therefore subject to an independent taxation of capital gains. Current investment income such as interest and dividends is likewise subject to flat-rate withholding tax.
For this income, § 32d EStG generally provides for a special tax rate of 25 percent. The legislature thereby removed increases in value of mobile financial investments from the logic of the speculation period.
Currency Tokens Compared With Shares
Currency tokens held as private assets, by contrast, continue to be covered by § 23 EStG. Increases in value remain untaxed after expiry of the one-year period. Two market-traded and return-oriented forms of investment are therefore treated differently.
The distinction does not merely run between different assets, but also within economically comparable positions. If the price risk of a token is replicated via a derivative or certificate with cash settlement, § 20 Abs. 2 EStG may apply. In the case of a direct investment in the token or physically deliverable certificates, by contrast, § 23 EStG may come into consideration.
Whether an economically comparable position is taxed at the flat rate or is not taxed after expiry of the period therefore depends substantially on its legal structure.
Burden Imbalanced in Both Directions
The current treatment favors long-term token gains because they are not taxable after expiry of the one-year period. At the same time, short-term gains from currency tokens may be taxed more heavily than gains from shares, as they may be subject to the progressive rate.
The classification under § 23 EStG therefore does not merely result in preferential treatment. It causes unequal treatment in both directions: within the one-year period through a potentially higher burden, and outside the period through non-taxation. The same applies in mirror image to losses.
2008 Business Tax Reform as a Benchmark
Abandonment of the Speculation Period for Securities
With the 2008 Business Tax Reform, the legislature made a fundamental change in respect of capital income. Current income and increases in capital value were captured for mobile financial investments in a separate schedule. The one-year speculation period for securities that had applied until then was abandoned.
According to the legislative explanatory memorandum, the separate flat tax rate was intended, among other things, to neutralize investment decisions, simplify administration and secure Germany as a location in view of mobile capital investments. Behind this stood the assessment that current income and capital gains increase economic ability to pay to the same extent.
Economic Substance of Currency Tokens
The key question is whether currency tokens are economically more similar to gold or to shares. What matters here is not volatility alone, but its character and the function of the investment.
Bitcoin and comparable currency tokens do not fluctuate like classic tangible assets whose price develops gradually. Their value movements are strongly shaped by market dynamics, risk appetite and return expectations. Gold, by contrast, is typically described as a store of value and crisis investment.
In addition, currency tokens have no use or processing value. Their price is formed through expectations and assessments of market participants. The fact that they do not confer a claim to current income does not necessarily preclude proximity to capital investments, since § 20 EStG may also cover instruments that do not generate current income.
Limits of the Share Analogy
Currency tokens neither represent a corporate participation nor a capital claim. They therefore do not readily fall within the catalogue of § 20 Abs. 2 EStG. For capital gains from currency tokens, a direct reclassification by courts can therefore hardly be achieved de lege lata.
The conclusion advocated in the original article is therefore directed primarily at the legislature. The situation may be different for current income from certain stablecoins because these may embody a monetary claim.
Classification Under Equality Law
Consistent Implementation of Legislative Decisions
Art. 3 Abs. 1 GG (German Basic Law) requires, in tax law, an equal tax burden according to economic ability to pay. If the legislature has made a decision to impose a tax burden, it must treat comparable circumstances consistently. Exceptions require an objective reason.
Purely fiscal considerations are not sufficient as justification. The decisive question is whether economically comparable ability to pay is burdened equally or unequally.
Lack of Monetary Character as a Ground for Differentiation
It could be argued in justification of the unequal treatment that currency tokens are not legal tender. According to the view taken in the original article, however, this argument does not carry far if the economic substance corresponds more closely to a return-oriented capital investment.
The absence of an issuer or of a securitized claim is, on this view, also not decisive on its own. The formation of comparison groups should not be based solely on the external legal form, but on the economic substance.
At the same time, it remains to be noted that the requirement of consistency under the case law operates within the legislature’s fundamental decisions. It does not abolish the dualism of income categories as a whole. A court therefore likely cannot classify currency tokens as investment income de lege lata without an express statutory basis.
Growing Significance of Actual Market Development
According to the case law of the Bundesverfassungsgericht (BVerfG, Federal Constitutional Court), a typification that was originally viable may become incompatible with equality if factual developments deprive it of its basis. The original article applies this idea to crypto assets. The more strongly market behavior and statutory classification diverge, the less a continued adherence to outdated classifications can be justified.
It is additionally significant that the structure of flat-rate withholding tax is also being reviewed under equality law in other areas. In particular, the proceedings pending before the Bundesverfassungsgericht (BVerfG, Federal Constitutional Court) concerning § 20 Abs. 6 EStG are mentioned. For futures transactions, the BFH had already affirmed equality-law concerns in interim relief proceedings regarding a restriction on loss offsetting; the legislature has since repealed the restriction in question.
Lending Income Under Current Law
Economic Classification of Lending
In lending, the investor transfers tokens for a limited period of time in return for remuneration. During the term, the investor forgoes the use of the transferred assets and receives in return a usage fee as well as a claim for the return of tokens of the same type and quantity.
Economically, this resembles an interest-bearing provision of capital. However, the tax qualification does not depend solely on this economic proximity. In particular, the decisive question is whether there is a capital claim within the meaning of § 20 Abs. 1 Nr. 7 EStG.
Decision of the Finanzgericht Köln on Bitcoin Lending
In its judgment of 10 September 2025, the Finanzgericht Köln (Cologne Fiscal Court) did not treat lending income from Bitcoin as investment income. It classified it as other income under § 22 Nr. 3 EStG. In the court’s view, § 20 Abs. 1 Nr. 7 EStG requires a capital claim directed at a monetary payment.
According to the decision, Bitcoin is not legal tender due to the lack of generally binding acceptance and does not even embody a claim. In doing so, the senate addressed the opposing view, which economically compares lending with interest on capital provided. However, in the court’s view, mere economic comparability was not sufficient to extend the concept of a capital claim to Bitcoin.
The appeal on points of law is pending before the Bundesfinanzhof (BFH, Federal Fiscal Court) under case reference VIII R 22/25. According to the original article, the proceedings concern Bitcoin lending and thus a non-redeemable token.
Scope of the Decision
For non-redeemable currency tokens, the reasoning of the Finanzgericht Köln appears consistent. A token such as Bitcoin does not confer a contractual claim against an issuer. It is an asset, but not a claim.
According to the view discussed, however, applying these considerations to all crypto assets is problematic. Stablecoins that confer an enforceable redemption claim in fiat money differ materially from Bitcoin in this respect.
Stablecoins as Possible Capital Claims
Redemption Claim in Fiat-Backed Stablecoins
Fiat-backed stablecoins may be classified differently from non-redeemable tokens. In the case of e-money tokens within the meaning of Regulation (EU) 2023/1114 on markets in crypto-assets, Art. 49 of that Regulation grants the holder a claim to redemption at par value in the reference currency.
Such a stablecoin therefore embodies a claim against the issuer. The token is not merely a unit of account, but confers an enforceable claim to payment in money. In the case of stablecoins outside the MiCAR regime, the quality as a claim depends on the specific redemption terms.
Lending of Stablecoins
If a fiat-backed stablecoin with an enforceable redemption claim is provided for remuneration, the view taken in the original article suggests that § 20 Abs. 1 Nr. 7 EStG is strongly indicated. The claim for return is formally directed at tokens. Economically, however, the monetary claim embodied in the token is transferred.
According to this view, the fact that the redemption claim exists against the issuer and not against the borrower does not alter the quality of the transferred asset as a claim. The stablecoin serves as a medium for transferring a monetary claim.
The proximity to a foreign currency balance is more evident here than in the case of a non-redeemable currency token. According to this view, no expansion of the concept of a capital claim is required because the claim itself already exists.
Distinction From Non-Redeemable Tokens
For Bitcoin and comparable non-redeemable tokens, the position remains different. There is no issuer against whom a claim to monetary payment exists. On its underlying reasoning, the decision of the Finanzgericht Köln therefore concerns precisely this type of token.
In the appeal proceedings VIII R 22/25, the Bundesfinanzhof can make decisive statements on stablecoins only insofar as they are covered by the subject matter of the dispute. According to the original article, a clarification would be significant that the rejection of a capital claim in the case of Bitcoin does not automatically apply to redemption-backed tokens.
Austrian Model as a Comparison
Classification as Capital Income
Austria has created an independent regime for cryptocurrencies with § 27b öEStG (Austrian Income Tax Act). Since 1 March 2022, these have been allocated to income from capital assets and are generally subject to a special tax rate of 27.5 percent. There is no holding period for new holdings under this regime.
The exchange of cryptocurrency for cryptocurrency is structured as tax-neutral. Acquisition costs are carried forward. In addition, loss offsetting against other capital assets favored by the special tax rate is available.
Withholding Tax and Grandfathering
Since 1 January 2024, Austria has had a mandatory withholding of capital gains tax by domestic service providers. Holdings acquired before 1 March 2021 continue to be subject to the previous regime.
According to the assessment expressed in the original article, the model shows that a schedular and flat-rate treatment of crypto assets can be administratively feasible. At the same time, grandfathering structures the transition to a new system.
Need for Reform in German Law
Enforceability of Taxation
A frequent objection to classification as investment income concerns practical enforceability. For current law, the BFH has already rejected the existence of a structural enforcement deficit in the capture of disposal transactions involving currency tokens.
New reporting and transparency instruments are being added. The DAC8 Directive transposes the OECD reporting framework for crypto assets into EU law. The Kryptowerte-Steuertransparenzgesetz (Crypto Assets Tax Transparency Act) implements these requirements into national law as of 1 January 2026.
In particular, the following are subject to reporting obligations:
- providers of crypto-asset services under MiCAR,
- certain crypto-asset operators without an EU license,
- reportable transactions for users resident in Germany,
- annual information to the Bundeszentralamt für Steuern (Federal Central Tax Office),
- personal data and transaction-related information.
The automatic exchange of information increases the likelihood of detection, particularly in cross-border cases. The regime is accompanied by fines.
Possible Statutory Structure
According to the line presented in the original article, the legislature could either create a separate taxable event for crypto investment income or expand § 20 EStG. In addition, a crypto-to-crypto exchange privilege and a loss offset mechanism consistent with the system could be considered.
Irrespective of such a reform, it is argued with respect to current income from stablecoins with a genuine monetary claim that § 20 Abs. 1 Nr. 7 EStG may already apply under current law.
Draft Bill of the Federal Ministry of Finance
Planned Allocation to Capital Assets
In connection with the benchmark figures for the 2027 federal budget, the Federal Cabinet resolved an adjustment to the taxation of crypto assets. The Bundesfinanzministerium (BMF, Federal Ministry of Finance) confirmed that income tax law has so far contained no crypto-specific regulation and announced new rules.
A bill introduced by the parliamentary group Bündnis 90/Die Grünen, which would have eliminated the holding period for crypto assets in isolation without allocating them to capital assets, failed in the Finance Committee. According to the view discussed, this supports the thesis that a pure period-based solution within § 23 EStG does not replace systematic classification.
With the government draft for the 2027 federal budget, the direction of allocating crypto assets held as private assets to income from capital assets was taken up. The BMF draft bill specifies this through an expansion of § 20 EStG.
Covered New Holdings and Exceptions
Under the draft, gains from the disposal of exchange crypto assets, in particular Bitcoin and Ether, are to be subject to the special rate under § 32d Abs. 1 EStG as income from capital assets irrespective of the holding period. This is to apply insofar as the tokens are acquired or accrue after 31 December 2026.
The draft excludes e-money tokens. According to the status of the original article, the draft is in early coordination within the Federal Government. Changes in the further procedure remain possible.
For new holdings, the draft would eliminate the previous bifurcation. Short-term gains would no longer be taxed progressively, and long-term gains would no longer fall outside taxability after expiry of the one-year period. However, the loss side would be included only in accordance with § 20 Abs. 6 EStG.
Grandfathering and Transition
The draft provides for extensive grandfathering. Holdings acquired up to 31 December 2026 are to remain permanently within the regime of § 23 EStG. The transition technique thus follows earlier rules, for example in connection with the 2008 Business Tax Reform and the Austrian model.
The downside of this grandfathering is that the incoherence eliminated for new holdings continues for legacy holdings. From a constitutional law perspective, the decisive factor is the protection of legitimate expectations. Increases in value that have already arisen and, under previous law, can be realized tax-free due to expiry of the period may not be captured retroactively. The mere expectation of future tax-free increases in value, by contrast, is not protected in the same way.
Current Income and E-Money Tokens
According to the analysis presented, there is a need for refinement in respect of current income. For exchange crypto assets, the draft expressly includes income from providing assets for use in § 20 EStG. For non-redeemable tokens, the legislature is not dependent on the characteristic of a capital claim.
E-money tokens, by contrast, are excluded, even though they may embody a monetary claim. According to the view taken in the original article, this exception is free of contradiction only if lending income from such tokens already falls under § 20 Abs. 1 Nr. 7 EStG under current law.
Key Statements on the Classification of Crypto Assets
The current taxation of currency tokens held as private assets allocates them to § 23 EStG and thereby places them economically close to gold. According to the position discussed, this equivalence is not convincing because currency tokens appear more share-like in terms of market behavior and economic substance.
For capital gains, reclassification under current law can hardly be achieved due to the closed catalogue of § 20 Abs. 2 EStG. This results in a mandate for the legislature to act, the weight of which increases as the divergence between market reality and statutory classification grows.
A distinction must be made in the case of current lending income. The rejection of § 20 Abs. 1 Nr. 7 EStG may be viable for non-redeemable tokens such as Bitcoin. This does not automatically apply to fiat-backed stablecoins with a genuine monetary claim.
The Austrian model shows one possible systematic classification as investment income. DAC8 and the Kryptowerte-Steuertransparenzgesetz weaken the objection of insufficient enforceability. The BMF draft bill adopts the classification for newly acquired exchange crypto assets, but leaves a need for clarification regarding e-money tokens and current income.
Tax Law Classification With Regard to Crypto Assets
The income tax treatment of crypto assets continues to be shaped by fine distinctions. Particularly decisive are the type of token, the asset sphere, the holding period, the structure of any redemption claim and the question of whether current income or capital gains are involved. Companies, investors and high-net-worth private individuals who wish to have tax law questions in this area reviewed can find further information at MTR Legal under Legal advice in tax law.
