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Why a holding period? 14 Reasons Why Maintaining the Holding Period for Crypto and Bitcoin Is Important.

Reasons why the tax holding period must be maintained

The one-year tax holding period for cryptocurrencies is not a “tax loophole,” but a deliberately created legal framework for long-term investment in digital assets.

Abolishing this regulation would have far-reaching negative consequences—for private savers, companies, innovation, and Germany as a business location as a whole.

Below, we have compiled the most important arguments for maintaining the holding period.

Protection of trust for long-term Bitcoin and crypto investors

Many Bitcoin and crypto investors invested years ago—at a time when cryptocurrencies were still largely ridiculed socially and politically. They consciously took high risks and made their investment decisions based on the legal situation at the time. This included the clear tax regulation that profits are tax-free after a holding period of one year.

Anyone wishing to tighten the tax framework retroactively or after the fact today undermines confidence in the reliability of political decisions. Long-term investments require stable rules. If citizens must expect at any time that the state will re-evaluate successful developments for tax purposes in hindsight, it damages trust in Germany as a legal and business location.

Cryptocurrencies were already purchased with taxed income

Bitcoin and other cryptocurrencies are not “generated for free,” but are generally acquired with income that has already been taxed. Many investors invest parts of their salary or savings into Bitcoin after income tax and social security contributions have already been paid on that income.

The holding period ensures that long-term wealth creation is not subject to additional burdens. This principle also exists for other assets such as gold or art. Additional taxation of long-term Bitcoin profits would therefore be perceived by many citizens as a double burden.

The holding period specifically protects small savers

The majority of Bitcoin users are not large-scale investors or institutional speculators, but private small savers. Many people save in Bitcoin monthly with small amounts—similar to an ETF or stock savings plan—to build up additional private retirement provision for the long term.

Younger people in particular are increasingly looking for alternative ways to build wealth as confidence in the long-term stability of statutory pension systems declines. Additional taxation of long-term crypto investments would hit exactly those citizens who want to provide for themselves responsibly.

Politicians regularly call for more private provision. It would be contradictory to first enable long-term saving with Bitcoin and then penalize it through taxation.

Bitcoin is already treated similarly to gold

The current tax treatment of cryptocurrencies is based on the taxation of other non-yielding assets such as gold or art. These are also subject to tax-free disposal after certain periods have expired.

Like gold, Bitcoin does not generate ongoing income such as dividends or rental income. Special taxation of Bitcoin would therefore represent unequal treatment compared to comparable assets.

Should the legislator wish to treat cryptocurrencies differently in the long term, it would need to be clarified whether this is compatible with the principle of equal treatment or whether a completely new tax category would need to be created.

Not all cryptocurrencies are the same

The term “cryptocurrencies” encompasses very different systems and technologies. For example, Bitcoin has no central issuer and resembles a digital commodity in many of its properties. Other cryptocurrencies, on the other hand, have central companies, issuers, or distribution mechanisms.

A blanket tax treatment of all cryptocurrencies ignores these differences. It is already clear today how difficult it is to achieve a clean regulatory classification of various crypto assets.

Abolishing the holding period would create additional classification problems and significantly increase the regulatory burden.

Related article: Not all cryptocurrencies are the same

Massive bureaucracy for banks, brokers, and crypto exchanges

A new crypto tax would place significant technical and organizational demands on banks, brokers, and crypto exchanges. These companies would have to develop extensive systems to correctly record purchase prices, sale times, holding periods, and taxable profits.

This is particularly complex with cryptocurrencies, as assets are frequently transferred between different wallets, exchanges, and platforms. The monitoring and documentation systems required for this would incur high costs, which would ultimately be passed on to customers.

Smaller providers and startups in particular could be heavily burdened by these regulatory requirements.

International providers can hardly be controlled

Even if German crypto exchanges were required to automatically deduct taxes, the question remains as to how transactions via international platforms should be controlled.

Cryptocurrencies can be easily transferred between different wallets and providers—often across national borders. Investors could simply move their holdings to foreign platforms that are not subject to German tax monitoring.

This would disadvantage German providers and, at the same time, significantly reduce the desired tax effect.

Bitcoin payments would become practically unusable

If every payment with Bitcoin automatically constitutes a tax-relevant event, the use of cryptocurrencies as a means of payment will be made significantly more difficult.

Even buying a coffee could have to be documented and evaluated for tax purposes in the future. This would create a significant bureaucratic burden for citizens, merchants, and payment service providers.

Such a regulation would hinder innovation in the field of digital payment methods and effectively make Bitcoin unattractive for everyday use.

High administrative burden for the state itself

Not only companies, but also the tax administration itself would have to devote significant resources to implementing and monitoring complex crypto taxation.

The technical tracking of wallets, exchanges, and transactions is costly. At the same time, new auditing and control mechanisms would have to be created.

There is a real danger that administrative costs will ultimately be higher than the additional tax revenue actually generated.

Austria shows the problems of a crypto tax

Austria is often cited as a model for stronger taxation of cryptocurrencies. In fact, however, the expected additional tax revenues there fell significantly short of the original forecasts.

At the same time, significant costs were incurred by banks, brokers, and crypto service providers, who had to develop extensive technical systems for tax recording.

The example shows: Higher crypto taxes do not automatically lead to higher state revenues.

Doubts about extremely high tax estimates

Studies or estimates are repeatedly published that allegedly promise the state billions in additional revenue through a crypto tax.

To date, however, there are hardly any reliable scientific studies that seriously substantiate these figures. Such estimates are often based on simplified assumptions and take into account neither evasive movements nor international capital shifts or the actual administrative burden.

Political decisions should not be based on uncertain projections.

Further article: Billions from crypto tax?

Germany could lose its competitive advantage

Germany is currently considered a comparatively attractive location for Bitcoin and crypto companies. The existing tax treatment has helped to attract investors, developers, and innovative companies.

At the same time, many other countries are actively trying to position themselves as innovation-friendly crypto hubs. Tightening taxation could lead to companies, capital, and talent migrating abroad.

Especially in a global market of the future, Germany should not lightly give up its competitive advantage.

The holding period promotes long-term thinking instead of short-term speculation

The existing regulation rewards long-term holding instead of short-term trading. This creates an incentive for sustainable investment behavior and long-term wealth creation.

A flat tax regardless of the holding period, on the other hand, could even make short-term speculation more attractive, as long-term holding would no longer have a tax advantage.

The holding period thus supports more responsible investor behavior.

Bitcoin is more than just an object of speculation

Many people view Bitcoin not just as an investment, but as a technological innovation, an alternative monetary system, and a long-term store of value.

However, the political debate often reduces cryptocurrencies exclusively to speculation or tax avoidance. As a result, the social and technological significance of Bitcoin is underestimated.

An innovation-friendly policy should take a nuanced view of new technologies and not prematurely slow them down with additional tax burdens.