Staking: Federal Ministry of Finance overturns 10-year crypto holding period

Despite the bloody sell-off on the crypto market, a message from the Federal Ministry of Finance is causing euphoria in crypto Germany. Because the controversial holding period of ten years for staking and lending is a thing of the past. The BMF shared this on her home page With.

Specifically, the letter is an instruction to the tax authorities on how cryptocurrencies are to be recorded for tax purposes. The focus here is on the abolition of the ten-year holding period. Specifically, the document states:

In the case of virtual currencies, the extension of the disposal period follows § 23 paragraph 1 sentence 1 number 2 sentence 4 EStG not applicable.

About a year ago, the then SPD-led BMF had insisted on the holding period. Cryptocurrencies generated from staking and lending now have a one-year holding period. Accordingly, there is relief within the German crypto scene. Werner Hoffmann, head of the firm specializing in crypto tax law Pekuna, had previously worked closely with the BMF. Compared to BTC-ECHO, he rates the letter as “positive” overall.

Of course, it is particularly positive to see that numerous points have been improved and in most cases this went in a positive direction for the crypto community. Especially the 10-year period for staking was a big topic.

Frank Schäffler from the FDP parliamentary group described the letter as a “milestone” for the German crypto industry, which creates “more tax law clarity”.

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Cryptocurrencies are economic goods

What is new, for example, is that Bitcoin and Co. are now clearly defined as economic goods, which makes it possible to classify them in German income tax law in the first place. In the past there had been several court cases due to the lack of a definition. In general, the Ministry sharpened several terms again.

There are also innovations in the valuation of cryptocurrencies. If the old draft of the SPD-led ministry provided for an “average value of three exchanges”, now the course of a trading platform (such as Bitpanda, Coinbase or binance) or a “value-based list” like CoinMarketCap. Tax experts rate this step as significantly more practice-friendly.

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Staking could become a tax trap

Although the crypto draft exempts staking from the 10-year retention requirement, the BMF will in future distinguish between active and passive staking. While the latter is considered “private wealth management” and thus falls under “other income” in the tax return, active staking is classified as commercial. The main difference is the block creation. The BMF letter states:

Block creation does not represent private wealth management. Both in mining and in forging [BMF-Begriff für Staking] block creators receive the block reward and transaction fees in exchange for creating new blocks. The activity thus corresponds to the image of a service provider.

For example, anyone who operates a staking node is considered a service provider according to the definition of the Federal Ministry of Finance and must therefore pay commercial tax on their income. Werner Hoffman sees a need for improvement here.

This is critical because completely different tax regulations apply in the commercial sector, which most people will not be aware of at the time.

For example, there is no tax-free period and the termination of the activity also means that all capital has to be taxed.

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In addition, other topics such as NFTs or Decentralized Finance (DeFi) are not yet sufficiently covered, according to the tax expert. A circumstance that should be tackled in further cooperation.

Grow your cryptocurrencies with staking

eToro users can easily profit from their crypto holdings. With its own staking service, users can increase their crypto assets in a simple, safe and hassle-free way.

To the provider

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