In her monthly “Expert Opinion”, Selva Ozelli, an international tax lawyer and CPA, talks about the intersection between new technologies and sustainability and provides updates on the latest developments in tax, AML / CFT and legal issues related to crypto and blockchain.
Germany has risen to number one in the Coincub Travel Guide for the Most Crypto-Friendly Countries in the First Quarter of 2022. Europe’s most economically strong country allows its long-term domestic savings industry to leverage crypto investments. These are also supported by the fact that there is no tax on long-term capital gains from crypto, and the number of Bitcoin and Ethereum nodes is also the second highest after the United States.
In 2019, Germany became the first country to introduce a blockchain strategy to exploit the potential of digital transformation technology and make the country an attractive center for the development of blockchain, web3 and metaversum applications in the fintech areas, to create climate technology , business and govtech. There is also the project for digital identities.
The German Savings Banks and Giro Association is a network of 400 savings banks in German-speaking countries and is already developing fintech blockchain applications that allow customers to buy and sell cryptocurrencies. Various companies such as Volkswagen, About You, SAP, BrainBot and BigchainDB have developed NFT, Metaverse, Web3, Govtech and crypto payment applications that are widely used in e-commerce. Jacopo Visetti, an advisor to C3, a group of operators and investors supporting companies looking to reduce emissions, explained:
“C3 is a climate technology company that is developing an advanced technological infrastructure to tokenize carbon credits from international standards to blockchain.”
To fund the development of these technologies, Roundhill Investments, an ETF sponsor focusing on innovative theme funds, launched the Roundhill Ball Metaverse UCITS ETF at Deutsche Boerse Xetra. He describes this as Germany’s first exchange-traded Metaversum fund. In addition, pension funds, insurance companies, family offices and business investment funds are allowed to invest up to 20 percent of their assets in digital assets under German investment fund law.
As of 2021, about 2.6 percent of Germans used cryptocurrencies. According to a recent report by KuCoin, 44 percent of Germans are interested in investing in crypto.
German investors can invest in crypto and blockchain 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 or with Dash shop at Sugartrends. Mark Mason, Manager for Communications and Business Relationships at Dash, explained:
“Dash is an alternative cryptocurrency that offers financial freedom without limits. It accelerates financial inclusion by allowing people to use their phones as bank accounts. It is decentralized, license-free and censorship-resistant.”
In this context: What the SEC can learn from German regulators
Germany is among the top 10 countries for cryptocurrency mining and is also home to the EU’s largest mining company, Northern Data, which is almost exclusively powered by renewable energy. Cryptomining is taxable as a business activity.
Several blockchain startups have settled in Germany’s crypto capital Berlin. Apeiron Investment Group from the well-known fintech investor Christian Angermayer finances the Berlin companies Denario and Penta, the Cologne company Nextmarket and the Frankfurt company Northern Data.
Paycer is a Hamburg-based fintech startup that specializes in cryptocurrencies and decentralized financing and is developing a bridge protocol that combines DeFi and cross-chain crypto services with traditional banking services.
Berlin fintech startup Forget Finance, on the other hand, focuses on getting young people to save and invest in cryptocurrencies through online coaching with a mix of AI bots and real financial experts.
Central Bank’s digital currency
According to a study by the Deutsche Bundesbank, the share of cash payments at checkout from German consumers fell from 74 percent in 2017 to 60 percent in 2020. Therefore, the Bundesbank is working to process assets using distributed financial technology. Meanwhile, the European Central Bank is considering introducing a CBDC, commonly referred to as the digital euro. From discussions with EU citizens, the ECB has found that security and general acceptance are the most important aspects of such a digital central bank currency.
NFTs and Metaverse
Metaverse is the next wave of Web3 that transforms the way we interact, socialize, work, play video games, support charities, buy and sell NFTs, and attend concerts, sporting events, and conferences. The Center for Art and Media (ZKM) in Karlsruhe acquired a number of NFTs in 2017, ie before 2021, and now exhibits works from its own collection and from private lenders on the “ZKM Cube”. This is a publicly available, cube-shaped display. Margit Rosen, head of the department of collection, archive and research at ZKM, explained this idea in an interview.
Since the start of the NFT craze, German sportswear company Adidas has partnered with the Bored Ape Yacht Club and Prada on a charitable, climate-related NFT art project on the Polygon blockchain to raise awareness of this issue. In addition, the German car group Volkswagen has launched an interactive NFT advertising campaign, which has so far been very successful.
Brian Shuster, Founder and CEO of Utherverse, said: “Since 2005, Utherverse has built and operated a virtual online community where people can connect, participate in events and start businesses in real time. Utherverse brings the best of the web, gaming and virtual for the ultimate metaverse experience Secret City is about a game developed by Utherverse Digital Inc. 81 percent of the users are based in Germany.We have over 100 patents and patent applications for core internet technologies and metaverse and make it the undisputed leader in metaverse architecture and VR economics. There’s a lot of talk about Metaverse these days, and honestly most companies that want to offer real estate and tokens have underestimated the complexity of it. Almost all companies that tried to create a metaverse , failed The third generation of Utherverse and its use ity token is expected to be launched in Q2 2022. “
In this context: Women’s role in blockchain: NFTs and crypto promote female creators
Illegal use of cryptocurrencies
Germany is a member of the Europol Joint Cybercrime Action Taskforce, which works to combat cybercrime beyond national borders. A Europol report from 2022 states:
“The use of this virtual currency for criminal activity and money laundering has increased and become more sophisticated in recent years. Criminal use of cryptocurrencies is no longer limited to cybercrime, but now refers to all types of crimes involving transfer, require monetary values. “
After receiving a tip, the German Federal Criminal Police took the servers on Hydra, the world’s largest illegal dark web marketplace, offline. Hydra has seen over $ 5 billion in Bitcoin (BTC) transactions since its launch. Following Germany, the US Treasury Department also imposed sanctions on Hydra in a coordinated international effort to stop the spread of malicious services, dangerous substances and other illegal offers offered through the website.
In this context: The world is jointly imposing crypto sanctions on Russia
Gurvais Grigg, CTO of the public sector at Chainalysis, commented: “The Hydra takeover is remarkable, not only because it was the largest darknet market, but also because it offered money laundering, which could be exchanged for Russian rubles. ” He continued:
“With last year’s sanctions against Garantex and Suex and Chatex, the authorities are clearly targeting payout sites that cybercriminals use for ransomware, dark web sales, fraud and potential evasion of sanctions.”
Regulation of digital assets
Germany is one of the few countries in Europe that has already begun to regulate cryptocurrencies, even before the EU Regulation on Cryptocurrency Markets Regulation (MiCA) enters into force. According to Robin Matzke, a lawyer and blockchain expert who has advised the German Bundestag, German regulation of cryptocurrency requires that those who control private keys on behalf of others and serve the German market must have a license from the Federal Financial Supervisory Authority . Whether or not they have other similar licenses within the EU.
In this context: Europe’s “MiCA” Regulation on Digital Assets: What’s the Status?
The new so-called EU transfer regulation also contains a disclosure obligation for “non-hosted” wallets. These are wallets that are not managed by a custodian bank or centralized exchange. Lone Fønss Schrøder, CEO of the blockchain company Concordium, explained:
“The new draft regulations entail significant changes in the way cryptocurrency transfers are currently carried out. This can be a major challenge for decentralized crypto solutions that consider anonymity as a core value and choose peer-to-peer (P2P) and Employ self -custody. Also, many projects can be blocked by their community from customizing their solutions. “
The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of the Cointelegraph.
Selva OzelliEsq., CPA, is an international tax attorney and state-authorized public accountant who frequently writes on tax, legal and accounting matters for Tax Notes, Bloomberg BNA and other publications and the OECD.