Germany’s Finance Ministry has published a draft proposal to impose a 25% capital gains tax on cryptocurrency profits from assets held longer than one year, replacing the current tax-free treatment for long-term holdings if parliament approves the change.

Under Germany’s current rules, cryptocurrency assets can generally be sold tax-free after being held for more than one year. The draft would end that exemption for assets acquired under the new regime and instead tax profits at the standard capital gains rate of 25%.

The proposal says the new treatment would apply to purchases made from January 1, 2027. According to the draft, cryptocurrencies bought before that date would continue to fall under the existing rules, creating a split between legacy holdings and assets acquired after the change takes effect.

The Finance Ministry also proposed an operational change beginning in 2028, with banks and financial institutions set to automatically withhold the tax. The ministry estimates the measure would raise €160 million in 2028, rising to €350 million by 2030.

The draft has already triggered political debate. A previous attempt by the Green Party to remove the tax exemption for crypto investments was rejected in May, and the AfD party has criticized the latest proposal. That leaves the measure facing a legislative process in which scope, timing, and final implementation details could still change.

Why It Matters

Germany is one of Europe’s largest economies, so a change in its crypto tax regime would matter beyond domestic investors. Ending the one-year exemption would mark a shift away from a framework that favored long-term holding and toward treatment closer to traditional financial assets.

The withholding requirement also points to a broader compliance trend. If adopted, it would push more crypto tax collection into the banking and regulated financial system, tightening the connection between digital assets, reporting infrastructure, and mainstream financial oversight.