Here’s Why Germany Ranked as the Most Crypto-Friendly Country

Germany topped Coincub's ranking of the most cryptocurrency-friendly countries in the first quarter of 2022. The European country allows its long-term domestic savings industry to invest in crypto assets, thanks to its zero-tax policy support for long-term capital on cryptocurrency gains. In addition, the number of Bitcoin and Ethereum nodes is second only to the United States.

Blockchain Technology Application

In 2019, Germany became the first country to adopt blockchain technology as a development strategy and promote the potential of its national digital transformation, making it an attractive region for developing blockchain, Web3 and metaverse applications in the fields of digital citizenship, fintech, climate, business and government technology.

The German Savings Bank Association, a network of 400 savings banks in German-speaking countries, has begun developing fintech blockchain applications to enable customers to buy and sell cryptocurrencies. For example: Volkswagen, About You, SAP, BrainBot, and BigchainDB have been developing applications such as NFTs, metaverse, Web3, govtech, and crypto payments, which are widely used for e-commerce purchases of goods.

To finance the development of these technologies, Roundhill Investments, an ETF sponsor focused on technology innovation funds, launched the Roundhill Ball Metaverse UCITS ETF on Deutsche Börse Xetra, Germany’s first metaverse exchange-traded fund. In addition, Germany’s Funds Act allows pension funds, insurance companies, family offices and corporate investment funds to allocate up to 20% of their assets to digital assets.

Crypto assets

As of the end of 2021, approximately 2.6% of Germans have used cryptocurrencies. According to a recent report by KuCoin, 44% of Germans have a motivation to invest in cryptocurrencies.

German investors can get involved in the crypto space through companies and platforms such as 1inch Exchange, Nuri, FinLab, Minespider, NAGA Group, Tangany, Coindex, CryptoTax, Upvest, Fiona, Blocksize Capital, USDX Wallet, Bitbond, and Iota Foundation, and they can use Dash to shop on Sugartrends.

Mark Mason, Marketing Manager at Dash:

"Dash is an alternative cryptocurrency that provides financial freedom without borders. It accelerates financial inclusion by allowing people to use their phones as bank accounts. It is decentralized, permissionless, and censorship-resistant."

Germany is one of the top 10 countries for cryptocurrency mining and is home to the largest mining company in the European Union, Northern Data, which is almost entirely powered by renewable energy. Crypto mining as a business is taxable.

Startups

Many blockchain startups have settled in Germany’s crypto capital, Berlin, with fintech angel investor Christian Angermayer’s Apeiron Investment Group backing Berlin-based Denario and Penta, as well as Cologne-based Nextmarket and Frankfurt-based Northern Data.

Paycer, a Hamburg-based fintech startup focused on cryptocurrencies and decentralized finance, is developing a bridge protocol that will aggregate DeFi and cross-chain crypto services and combine them with traditional banking services.

On the other hand, Berlin-based fintech startup Forget Finance focuses on motivating young people to save and invest in cryptocurrencies using online guidance through a combination of AI bots and real financial experts.

Central Bank Digital Currency

According to a survey by the German central bank, the Deutsche Bundesbank, the share of cash payments in consumer transactions by German consumers fell from 74% in 2017 to 60% in 2020. As a result, the German central bank has been working on distributed ledger technology asset settlement. Meanwhile, the European Central Bank is exploring the creation of a CBDC known as the digital euro.

NFT+Metaverse

Metaverse is the next wave of Web3, changing the way we interact, socialize, work, play video games, fund charities, buy and sell non-fungible tokens, and attend concerts, sporting events, and conferences. In 2017, the ZKM Center for Art and Media in Karlsruhe acquired a large number of NFTs, long before the craze of 2021. Now the "ZKM Cube" is an outdoor, publicly viewable cube-shaped screen that exhibits various collections.

Since the NFT craze began, German sportswear company Adidas has partnered with Bored Ape Yacht Club and Prada to launch a climate-focused charity NFT art project on the Polygon blockchain to raise awareness. In addition, German automotive company Volkswagen successfully launched an interactive NFT advertising campaign.

Brian Shuster, Founder and CEO of Utherverse, explains: “Since 2005, Utherverse has been building and operating an online virtual world community where people can socialize, attend events and start businesses in real time.

Utherverse combines the best of the internet, games, and VR to deliver the ultimate metaverse experience. For example, Secret City is a game developed by Utherverse Digital Inc., 81% of whose users are in Germany. With over 100 patents and pending patents developed for core internet technologies and virtual worlds, we are the undisputed leader in virtual world architecture and VR economics. There is a lot of noise related to the Metaverse, and frankly, most companies claiming to offer properties and tokens dangerously underestimate the complexity of the task at hand. Almost every company that has tried to make a Metaverse has failed. The third generation of Utherverse and its utility token is expected to launch in Q2 2022.”

crime

Germany is a member of Europol's Joint Cybercrime Action Task Force, which works to combat transnational cybercrime.

According to Europol's 2022 report:

“The use of virtual currencies for criminal activities and money laundering has increased in volume and sophistication over the past few years. The criminal use of cryptocurrencies is no longer limited to cybercriminal activities but now involves all types of crimes that require the transfer of monetary value.”

Following a tip-off, Germany’s Federal Criminal Police (Bundeskriminalamt) has shut down the servers of Hydra, the world’s largest illegal dark web marketplace. Since its launch, Hydra has facilitated more than $5 billion in Bitcoin (BTC) transactions. Following Germany’s action, the U.S. Treasury Department imposed sanctions on Hydra in a coordinated international effort to “block the spread of malicious cybercrime services, dangerous drugs, and other illicit products available through Russian websites.”

“The takedown of Hydra was notable not only because it was the largest darknet market, but also because it offered money laundering services that converted cryptocurrency into Russian rubles,” Gurvais Grigg, Chainalysis’ public sector chief technology officer, told me.

“Coupled with last year’s sanctions on Garantex, as well as Suex and Chatex, it is clear that government agencies are targeting cash-out points used by cybercriminals for ransomware, darknet market sales, fraud, and possible sanctions circumvention.”

Digital asset regulation

Germany is one of the few countries in Europe that began regulating cryptocurrencies before the EU crypto asset market or MiCA regulation. According to Robin Matzke, a lawyer and blockchain expert who advises the German Bundestag, Germany's cryptocurrency custody regulations require those who control private keys on behalf of others and serve the German market to hold relevant operating licenses, regardless of whether they are in the EU or not.

The EU’s new money transfer regulations also provide for the creation of regulations for “non-custodial” wallets, or crypto wallets that are not managed by a custodian or centralized exchange.

Lone Fønss Schrøder, CEO of blockchain company Concordium, explained:

“The new draft regulations require significant changes to the way cryptocurrencies are currently transferred. This is a huge challenge for decentralized crypto solutions that have anonymity as a core value and are committed to peer-to-peer (P2P) and self-custody. Moreover, many projects may be blocked by their communities from changing their solutions.”