Germany has ascended to the top of Coincub’s Q1 2022 list of the most crypto-friendly countries. The European country permits crypto investments in its long-term domestic savings sector, aided by its zero-tax policy on long-term capital gains from crypto, and it has the second-highest number of Bitcoin and Ethereum nodes in the world, trailing only the United States.
Adoption of blockchain technology
Germany was the first country to adopt a blockchain strategy in 2019 in order to capitalize on the technology’s potential for accelerating digital transformation and to position the country as an attractive hub for the development of blockchain, Web3, and metaverse applications in fintech, climate technology, business, and government technology, including Germany’s digital identity project.
The German Savings Banks Association — a network of 400 savings banks operating in German-speaking nations — has begun developing fintech blockchain applications that will enable consumers to purchase and sell cryptocurrencies. Numerous firms, including Volkswagen, About You, SAP, BrainBot, and BigchainDB, have developed NFT, metaverse, Web3, govtech, and cryptocurrency payment systems that are frequently utilized in e-commerce to make purchases. Jacopo Visetti, an adviser to C3 — a group of operators and investors that supports businesses that seek to cut emissions — said :
“C3 is a climate technology firm developing innovative technological infrastructure that enables the tokenization of carbon credits from international standards to the blockchain.”
Roundhill Investments, an ETF sponsor specializing in creative thematic funds, introduced the Roundhill Ball Metaverse UCITS ETF on the Deutsche Börse Xetra, presenting it as Germany’s first metaverse exchange-traded fund. Additionally, the Fund Location Act of Germany permits pension funds, insurance firms, family offices, and corporate investment funds to invest up to 20% of their assets in digital assets.
Adoption of cryptocurrencies
Around 2.6 percent of Germans used cryptocurrencies as of the end of 2021. Additionally, a recent research from KuCoin indicates that 44% of Germans are inclined to invest in cryptocurrency.
German investors can gain access to cryptocurrency and blockchain technology through companies and platforms such as 1inch Exchange, Nuri, FinLab, Minespider, the NAGA Group, Tangany, Coindex, CryptoTax, Upvest, Fiona, Blocksize Capital, USDX Wallet, Bitbond, and the Iota Foundation, or by shopping on Sugartrends using Dash. As Mark Mason, Dash’s director of communications and corporate relations stated:
“Dash is a decentralized cryptocurrency that enables borderless financial freedom. By enabling consumers to use their phones as bank accounts, it accelerates financial inclusion. It is decentralized, permissionless, and resistant to censorship.”
Germany is one of the top ten countries for crypto mining and is home to the largest mining firm in the European Union, Northern Data, which is almost entirely powered by renewable energy. Cryptocurrency mining is a taxable enterprise.
Numerous blockchain firms have established themselves in Berlin, Germany’s crypto capital, with Christian Angermayer’s Apeiron Investment Group funding Berlin-based Denario and Penta, as well as Cologne-based Nextmarket and Frankfurt-based Northern Data.
Paycer, a fintech business based in Hamburg that specializes in cryptocurrencies and decentralized finance, is building a bridge protocol that would collect DeFi and cross-chain crypto services and connect them with standard banking services.
On the other hand, Berlin-based fintech firm Forget Finance focuses on encouraging young people to save and invest in cryptocurrency through online coaching provided by a combination of AI bots and genuine financial professionals.
Digital currency issued by a central bank
According to a poll conducted by the Deutsche Bundesbank, Germany’s central bank, the ratio of cash payments in German consumers’ point-of-sale transactions decreased from 74% in 2017 to 60% in 2020. As a result, the Bundesbank has started working on asset settlements using distributed ledger technology.
Meanwhile, the European Central Bank is investigating the possibility of establishing a CBDC termed the digital euro. A recent ECB-commissioned study, based on interactions with panels of EU residents, places a premium on security and universal acceptance.
Nonfungible tokens and the metaverse
The metaverse is the next wave of Web3, transforming how we communicate, socialize, work, play video games, donate to charity, buy and trade non-fungible tokens, and attend concerts, sporting events, and conferences. The ZKM Center for Art and Media in Karlsruhe acquired several NFTs in 2017, well ahead of the 2021 frenzy, and is now displaying works from its own collection and private lenders on the “ZKM Cube” — an outdoor, publicly visible cube-shaped screen. Margit Rosen, the ZKM’s head of collection, archives, and research, disclosed the specifics during an interview.
Adidas has collaborated with Bored Ape Yacht Club and Prada on a charitable climate-focused NFT art initiative on the Polygon blockchain to raise awareness since the NFT frenzy began. Additionally, Volkswagen, a German automaker, has produced a successful interactive NFT advertising campaign.
Brian Shuster, founder and CEO of Utherverse, revealed that: Utherverse is the ultimate metaverse experience, combining the finest of the internet, gaming, and virtual reality.
For instance, Utherverse Digital Inc.’s Secret City is a game that has 81 percent of its users in Germany. We are the undisputed leaders in metaverse architecture and virtual reality economics, having generated over 100 patents and pending patents for key internet technologies and the metaverse.
There is a great deal of noise surrounding the metaverse, and frankly, the majority of organizations purporting to provide properties and token coins have grossly underestimated the work at hand. Almost every firm that has attempted to create a working metaverse has failed. Utherverse’s third generation and utility token are planned to be launched in Q2 of 2022.”
Unauthorized use of crypto
Germany is a member of Europol’s Joint Cybercrime Action Taskforce, which collaborates with other law enforcement agencies to combat transnational cybercrime. According to a Europol study from 2022:
“The usage of this virtual money for illicit operations and profit laundering has increased in volume and sophistication over the last several years. […] Cryptocurrency’s criminal application is no longer limited to cybercrime, but rather encompasses all sorts of crime requiring the conveyance of monetary value.”
Germany’s Federal Criminal Police Office, or Bundeskriminalamt, took down the servers of Hydra, the world’s largest illicit dark web market, after being tipped off. Since its inception, Hydra has enabled approximately $5 billion ( R77.6 bn) in Bitcoin (BTC) transactions.
Germany’s response was followed by the United States Treasury Department imposing sanctions on Hydra as part of a coordinated international effort to “disrupt the propagation of destructive cybercrime services, dangerous narcotics, and other unlawful offerings” available through the Russia-based website.
“The takedown of Hydra is significant not only because it was the largest darknet market in operation, but also because it offered money laundering services that enabled the conversion of cryptocurrency into Russian rubles,” Gurvais Grigg, public sector chief technology officer at Chainalysis, said. He went on to say:
“When combined with the sanctions imposed last year against Garantex, Suex, and Chatex, it is evident that government agencies are targeting cashout points used by hackers for ransomware, darknet market sales, scamming, and, potentially, sanctions evasion.”
Digital asset regulation
Germany is one of the few European countries to have begun regulating cryptocurrencies ahead of the European Union’s Markets in Crypto Assets, or MiCA, regulation. According to Robin Matzke, a lawyer and blockchain expert who advised the German Bundestag, Germany’s crypto custody regulation requires those who manage private keys on behalf of others and serve the German market to obtain a license from the Federal Financial Supervisory Authority, regardless of whether they currently hold similar licenses elsewhere in the EU.
Additionally, the EU’s new Transfer of Funds Regulation includes transparency requirements for “unhosted” wallets or cryptocurrency wallets that are not controlled by a custodian or centralized exchange. Lone Fnss Schrder, CEO of Concordium, explained:
“The new proposed legislation call for significant changes to the way bitcoin transactions are currently conducted. It could be a significant hurdle for decentralized crypto solutions that prioritize anonymity and are devoted to peer-to-peer (P2P) and self-custody. Additionally, many projects may be stymied by their community’s reluctance to change their solutions.”