Concerns are growing that Germany's planned overhaul of cryptocurrency taxation could increase burdens for retail investors.

Cryptopolitan, a blockchain media outlet, reported on Sept. 26 that a new draft tax plan being pushed by the German government includes applying a 50 percent taxation benchmark to investors who cannot prove their acquisition price, based on an assumption that the asset's value has doubled.

Patrick Hansen (패트릭 한센) of Circle, the largest stablecoin issuer authorised under the European Union's MiCA crypto regulatory framework, pointed out that this benchmark is particularly unfavourable for retail investors. "This adjustment will hit ordinary consumers and investors particularly hard," he said. "Users who were not aware of the regulatory change, or who are technically unable to cleanly prove the acquisition cost, could be affected the most," he added.

The issue is a structure in which, if the acquisition price is not proven, the tax authorities treat assets acquired from 2026 onward as taxable and levy tax on half of the profit. The benchmark stems from the state assuming the asset price has doubled. Hansen said that assumption is excessively high, citing annual declines in bitcoin and weakness in altcoins. "If no adjustment is made, ordinary investors could end up paying excessively high taxes," he said. "It is particularly problematic when the acquisition price cannot be proven convincingly." He also voiced concern that tax could be levied even on profits that do not exist.

The legal industry raised similar points. D-David Hoezel of the Poelath law firm said the 50 percent figure has not been finalised, but he saw a risk that a large tax could be imposed pre-emptively even on trades with little actual profit. "Protecting existing holdings ultimately depends on reliable documentation," he said.

This has made record-keeping a key issue for crypto investors in Germany. The German finance ministry has already set out its position that records must be kept on the acquisition date, quantity, purchase cost, transaction fees, and the platforms or wallets used. Tax returns, exchange transaction records and systematically organised personal spreadsheets can also be used as supporting materials.

Under the draft, the new system would apply to cryptocurrencies acquired after Dec. 31, 2026. Holdings from before Jan. 1, 2027 would largely remain under current rules. Withholding at source is expected to begin from 2028. Investors would need to manage existing holdings separately from new purchases, and the burden of reconstructing acquisition histories could increase for those who move between multiple exchanges or also use self-custody wallets.

The tax structure itself would also change significantly. The German government proposed imposing a flat 25 percent tax on crypto capital gains. With an additional 5.5 percent solidarity surcharge, a total of 26.375 percent would apply to bitcoin and ether. Under the current system, German retail investors often do not pay tax when cashing out bitcoin or other cryptocurrencies, but if the overhaul is passed, assets newly bought after the end of 2026 would be taxable regardless of holding period.

Not all digital assets would be treated the same. Non-fungible tokens, some stablecoins, security tokens and real-world asset (RWA) tokens would remain tax-exempt under the draft. By contrast, for short-term traders currently subject to a personal income tax rate of up to 45 percent, the flat tax could work in their favour.

The shift would be bigger for long-term holders. If the current tax-free treatment of capital gains is removed, for example, a long-term capital gain of 100,000 euros would require about 26,375 euros in tax and solidarity surcharge. The German government expects the system to generate 160 million euros in tax revenue in 2028 and rise to as much as 350 million euros a year by 2031.

The remaining issue is how much the draft will be revised in the final legislative process. The focus of the current controversy is not the tax rate itself but the 50 percent benchmark applied when acquisition prices cannot be proven and the record-keeping obligation. For retail investors, keeping clear transaction histories is likely to become an essential task regardless of whether the overhaul proceeds.