German Case Law on Bitcoin and Crypto Assets

Federal Fiscal Court, judgment of 14 Feb 2023 – IX R 3/22: gains on cryptocurrencies are taxable

The Federal Fiscal Court (BFH) held that virtual currencies (currency tokens such as Bitcoin, Ether, Monero) are assets, and that gains from disposing of them within one year of acquisition are taxable private disposal transactions (sec. 23 (1) sent. 1 no. 2 EStG). There is no structural enforcement deficit preventing taxation. A token is also acquired by exchanging it for other cryptocurrencies; a conversion into euros is not required for taxability.

Practical relevance: every transfer for consideration – including crypto-to-crypto swaps and using crypto as means of payment – can be a taxable disposal. In gifts and inheritance cases, by contrast, the predecessor's acquisition data carry over (sec. 23 (1) sent. 3 EStG) – a central building block of succession planning.

Source: bundesfinanzhof.de

Federal Ministry of Finance, circular of 6 March 2025: income-tax treatment of crypto assets

The tax administration comprehensively updated its position on crypto assets: acquisition and disposal, swaps, staking, lending, airdrops and hard forks, as well as taxpayers' cooperation and documentation duties. The circular replaces its 2022 predecessor and binds the tax offices.

Practical relevance: anyone transferring crypto assets – by gift, sale or contribution to a company – should meet the documentation requirements (acquisition dates, prices, transaction history) from the outset. Notarial deeds contribute reliable evidence.

Source: bundesfinanzministerium.de

Court of Justice of the European Union, judgment of 22 Oct 2015 – C-264/14 (Skatteverket v Hedqvist): exchanging Bitcoin for conventional currency is exempt from VAT

A Swedish businessman planned to buy and sell Bitcoin against Swedish kronor through his own website, earning only the spread between his purchase and sale price, with no separate fees. Sweden's Supreme Administrative Court referred the VAT question to the Court of Justice. The Fifth Chamber answered in two steps. First, the exchange is a supply of services for consideration within the meaning of Art. 2(1)(c) of the VAT Directive – the spread is the consideration, even though it is never invoiced as a fee. Second, that supply is exempt under Art. 135(1)(e) of the Directive, which covers transactions concerning currency and bank notes and coins used as legal tender. The Court read the provision in the light of its purpose: the exemptions for financial transactions exist to avoid the difficulties of determining the taxable amount; excluding Bitcoin merely because it is not legal tender would deprive the exemption of effect precisely where those difficulties arise. What matters is therefore that the parties accept Bitcoin purely as an alternative means of payment and that the units serve no other purpose. The two neighbouring exemptions do not apply: not Art. 135(1)(d) (payments and transfers), and not Art. 135(1)(f), because Bitcoin is not a security conferring a property right in a legal entity.

Practical relevance: the judgment remains the European foundation for the VAT treatment of crypto assets, and the German tax administration has incorporated it into its VAT application decree (sec. 4.8.3 (3a) UStAE on sec. 4 no. 8 lit. b UStG). In practice: simply exchanging Bitcoin for euros, or paying with it, triggers no VAT – the decisive questions arise in income tax (see the Federal Fiscal Court decision above, IX R 3/22). Two limits matter for drafting. First, the exemption extends only as far as the token serves purely as a means of payment; units with a purpose of their own – utility tokens, or in-game currency, which the decree expressly excludes – need separate analysis. Second, the judgment concerns the exchange itself: custody, administration and intermediation services around crypto assets follow their own rules. For notarial deeds in which Bitcoin is agreed as the purchase price or consideration – for instance when buying real estate against crypto assets – this is a reliable starting point: the transfer of value itself is not burdened with VAT; what remains to be settled is the valuation date, the price source and the income-tax documentation.

Source: curia.europa.eu

Higher Regional Court of Cologne, order of 26 June 2024 – 11 W 15/24: custodians must do everything reasonable to release crypto assets

A trustee had been ordered by final judgment to transfer substantial crypto assets from two escrow wallets to a new trustee and pleaded technical impossibility (lost private key). The court confirmed a coercive fine under sec. 888 of the Code of Civil Procedure: the debtor had not taken all reasonable measures – engaging specialised recovery providers and regulated custodians was, in particular, reasonable.

Practical relevance: whoever holds crypto assets for others – as trustee, custodian or executor – bears far-reaching duties of effort. Escrow and custody agreements should define access routes, key management and release mechanisms precisely from the start.

Source: nrwe.justiz.nrw.de

Higher Regional Court of Cologne, judgment of 13 Oct 2021 – 11 U 56/20: an ICO escrow agent must release custodied crypto assets once the trust agreement ends

A tax adviser held the crypto proceeds of a 2018 ICO (initial coin offering) in two wallets as escrow agent and, after falling out with the issuer, refused payment for years – invoking verification duties, unpaid fees and, latterly, technical problems. The court ordered release under sec. 667 of the Civil Code: once the escrow agreement was effectively terminated (here by a justified extraordinary termination, sec. 626), the release obligation fell due; a right of retention over the fee was ruled out by the very nature of an escrow relationship. Notably, release was owed not to the issuer itself but to the newly appointed escrow agent, because the buyer-objection procedure promised in the whitepaper had not yet been completed – and the agreed liability cap of EUR 1.5 million for negligence had to be pronounced in the operative part of the judgment itself. The utility tokens on offer were classified neither as securities nor as licensable deposit or e-money business.

Practical relevance: this judgment is the merits proceeding behind the 2024 coercive-fine order discussed above – together they show the full life cycle of a failed crypto escrow, from termination to enforcement. Anyone structuring escrow arrangements over crypto assets should regulate payout conditions, evidence and notification duties, fee security and liability caps expressly and consistently – it was precisely the interplay of whitepaper, escrow agreement and standard terms that fuelled years of litigation here.

Source: nrwe.justiz.nrw.de

Higher Regional Court of Düsseldorf, order of 19 Jan 2021 – I-7 W 44/20: a claim to the transfer of Bitcoin can be enforced by substitute performance

A debtor had been ordered by default judgment to transfer 0.9 Bitcoin to a precisely designated wallet address of the creditor – and failed to perform. The regional court considered the obligation non-substitutable (sec. 888 Code of Civil Procedure) because only the debtor knows his private key. The Düsseldorf court disagreed and authorised the creditor to procure substitute performance under sec. 887: since the judgment did not require the coins to come from a wallet of the debtor, the creditor may acquire the owed quantity on the market – much like a lender of fungibles owed crypto assets "of the same kind, quality and quantity" – and have it transferred; the debtor must advance the costs (here around EUR 7,000). Economically it is irrelevant to the creditor who effects the credit to his wallet.

Practical relevance: together with the Cologne decision (above), this maps out crypto enforcement: where the judgment is for a generic quantity ("0.9 BTC to wallet X"), the creditor can ultimately have it performed at the debtor's expense; where specific coins accessible only to the debtor must be released, coercive fines and detention remain the only route. For contract drafting – including notarial deeds – this means: define crypto performance obligations precisely (quantity, recipient wallet, procurement rights) so that the more effective enforcement route remains open in a dispute.

Source: nrwe.justiz.nrw.de

Higher Regional Court of Frankfurt am Main, judgment of 19 Sep 2025 – 7 U 80/24: a legal expenses insurer is bound by the arbitrating opinion – cover for an action over an alleged wallet defect

A policyholder had bought a hardware wallet for EUR 59.90 in December 2020 and stored 15.894 bitcoin on it. A few weeks later he found that the access credentials held on the device had been transferred to another device and that the coins had been sold via a trading platform; he put his loss at EUR 769,011.19. His legal expenses insurer refused cover for the intended action against the seller – no defect had been coherently pleaded and the action had no prospects of success – while pointing out the option of an arbitrating opinion by his own lawyer ("Stichentscheid"). That opinion was produced over fourteen pages; the insurer nonetheless maintained its refusal. The Frankfurt court held the insurer bound by it: under sec. 18 of the applicable policy conditions (ARB 2000), the binding effect falls away only where the opinion deviates substantially from the true factual and legal position. No further duty of neutrality can be read into the clause – the parties deliberately entrust the decision to the policyholder's own lawyer, who is required by professional rules to represent that client's interests (sec. 3 (1) Federal Lawyers' Act, sec. 1 (3) Professional Code); only a grossly improper opinion would lose its binding force. Nor is the opinion a comprehensive legal expert report: it need only address the grounds given in the refusal letter, while the insurer is barred from advancing fresh grounds later in the coverage proceedings. The senate declared cover owed for the equivalent value of the 15.894 bitcoin – not merely for the purchase price of the device – and awarded the EUR 2,306.82 cost of the opinion. Leave to appeal on points of law was refused; proceedings are pending before the Federal Court of Justice under IV ZR 212/25. The alleged defect itself has thus not been decided: the case concerned cover alone.

Practical relevance: for holders of crypto assets this is the economically decisive juncture – the amount in dispute follows the value of the lost coins, not the purchase price of the hardware, and without a coverage commitment such an action is barely feasible in practice. A refusal letter should therefore not be accepted unchecked: the arbitrating opinion is an effective instrument, payable by the insurer, and the insurer must put all its objections on the table at once. Two consequences for structuring: anyone holding crypto assets in self-custody should document acquisition, holdings and transaction history in an evidentially robust way from the outset – in litigation against a manufacturer or seller, the burden of pleading and proof decides the case. And anyone taking custody for others – as trustee, executor or as part of a succession arrangement – should settle who pursues which claims in the event of loss, and how they are funded.

Source: lareda.hessenrecht.hessen.de

Berlin Court of Appeal (Kammergericht), judgment of 25 Sep 2018 – (4) 161 Ss 28/18 (35/18): Bitcoin was not a financial instrument under the former KWG

The Kammergericht acquitted the operator of a bitcoin trading platform of conducting unlicensed banking business: bitcoin was neither a unit of account under the Banking Act (KWG) nor e-money under the Payment Services Act (ZAG); the supervisory authority's contrary practice exceeded the limits of permissible interpretation in criminal law.

Practical relevance: the decision marks the starting point of today's regulation – the legislature responded: since 2020, crypto assets are covered by the KWG and crypto custody is a licensable financial service (sec. 1 (1a) sent. 2 no. 6 KWG); since the end of 2024, the European MiCAR regulation applies in addition. For incorporations in the crypto sector, regulatory classification is now a central structuring issue.

Reference: dejure.org

Cologne Tax Court, judgment of 10 Sep 2025 – 3 K 194/23: income from crypto-lending is taxed at the personal rate

For the first time, a tax court has classified income from so-called crypto-lending – the compensated, temporary provision of Bitcoin to other users via a platform: it is miscellaneous income within the meaning of sec. 22 no. 3 EStG, taxable at the personal rate, and not capital income subject to the flat-rate withholding tax. Bitcoin does not embody a claim directed at money, so there is no capital claim within the meaning of sec. 20 EStG.

Practical relevance: the decision shows how differentiated the taxation of individual crypto uses has become. It is not final; the appeal is pending before the Federal Fiscal Court under VIII R 23/25. The further development is also of interest for the planned reorganisation of crypto taxation.

Source: press release justiz.nrw.de

Nuremberg Tax Court, judgment of 22 Jan 2025 – 3 K 760/22: crypto assets are taxable assets, and swaps are taxable too

The Nuremberg Tax Court confirmed the Federal Fiscal Court's line on the merits: Bitcoin, Ether and comparable units meet the requirements of "other assets" within sec. 23 (1) sent. 1 no. 2 EStG, provided they are transferable, marketable and market-valued. Taxation of realised gains from swap transactions does not require conversion into legal tender ("cashing out") – what matters is the realisation of an economic advantage.

Practical relevance: swapping one cryptocurrency for another can also be a taxable private disposal within the one-year period. This is an important consideration for documenting acquisitions – including in the context of notarial transfers.

Reference: gesetze-bayern.de (BeckRS 2025, 7241)

Crypto-Asset Tax Transparency Act (KStTG) – in force since 1 January 2026

The KStTG implements the European DAC8 directive: providers of crypto-asset services (exchanges, custodians) collect and report transaction and personal data of their users to the tax authorities. The first transmission is scheduled for 2027 (for data from 2026). This ends the effective opacity of crypto transactions towards the tax administration.

Practical relevance: evidentiary documentation of acquisition date, cost and origin of holdings becomes mandatory practice – not least to avoid unfavourable estimates. Notarial deeds on acquisition and transfer make a robust contribution.

Source: gesetze-im-internet.de

Planned: abolition of the one-year holding period from 2027 (legislative project)

The German government plans to abolish the one-year holding period of sec. 23 EStG for private crypto assets and to tax crypto gains in future regardless of the holding period (allocation to income from capital assets, flat-rate withholding tax). Planned entry into force: 1 January 2027. This is a legislative project, not yet applicable law – the parliamentary process and key details (grandfathering, loss offsetting) are open. The government tax bills of 14 August 2026 (Annual Tax Act 2026, Budget Accompanying Act 2027) do not yet contain the provision.

Practical relevance: until promulgation, current law applies. In detail in the article Bitcoin and tax: the end of the holding period from 2027.