A plan to raise tax on cryptocurrency investments is evidently missing from the coalition agreement approved by the parties set to form the new German government. The suggested tax reform sought to remove a tax exemption for crypto investors and bump the levy on private capital gains to 30%.

The idea was put forward by the Social Democrats who wanted to tax profits from crypto assets just like income from traditional stocks. To achieve that, they pressed for the removal of a one-year holding period that allows crypto traders in Germany to save on tax.

German parties skip crypto tax reform proposal in coalition deal for next cabinet

Parties from the new parliamentary majority in the Bundestag announced they have reached an agreement that will be the base of the country’s new federal government. Among other priorities, updating German crypto policy and promoting the digital euro are on the agenda as well.

Representatives of the center-right alliance of the Christian Democratic Union (CDU) and the Christian Social Union (CSU) as well as the center-left Social Democratic Party (SPD) will join upcoming Chancellor Friedrich Merz’s cabinet expected to be sworn in early in May.

A proposal put forward by the SPD during the negotiations in late March sparked negative reactions from the country’s crypto community. The party’s intention was to boost budget revenues by removing a tax exemption for crypto investors who hold Bitcoin (BTC), Ethereum (ETH) or other cryptocurrencies for more than a year.

Back then, the Social Democrats wanted to “tax income from cryptocurrencies like capital income” and “increase the flat-rate tax on private capital income to 30%,” BTC Echo recalled in an article. The German crypto news outlet noted that this plan is missing from the coalition agreement unveiled on Wednesday.

Instead, the partners are now vowing to “review the regulation of crypto assets, the grey capital market and shadow banks for gaps and close them if necessary.” They also want to promote Europe’s central bank digital currency (CBDC) that is currently in the making.

“We support a digital euro that delivers real added value in both wholesale and retail trade, complements cash, protects consumer privacy, is free to use for consumers, and does not compromise financial stability,” the parties declared.

New government is yet to convince most Germans to embrace digital euro

The European Central Bank (ECB) is working to finalize its CBDC project this year with President Christine Lagarde recently setting the deadline for October. The eurozone’s monetary authority assures its digital currency will have the features mentioned in the German coalition agreement.

But the executive power in Berlin is yet to convince the majority of German citizens that this will indeed be the case. According to a survey conducted by BTC Echo, more than 66% of them currently reject the digital euro, citing security concerns.

A report by the Polish daily Gazeta Wyborcza earlier this month revealed similar attitudes among Poland’s opposition leaders and representatives of the country’s crypto industry regarding the digital euro project and the EU’s new Markets in Crypto Assets (MiCA) regulations.

In March, Germany’s Federal Ministry of Finance (BMF) issued a circular revisiting tax regulations applicable to crypto-related profits. It highlighted, in particular, the obligation of traders to record and report all of their crypto transactions.

The BMF letter confirmed the existing rule that investors who sell cryptocurrencies more than a year after their purchase do not owe tax on the gains. Profits of less than €1,000 from all private sales within a calendar year are also exempted from taxation.

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