The German government is pushing a plan to end the tax exemption that applied when cryptocurrencies were sold after being held for more than 1 year.

Cryptopolitan, a blockchain outlet, reported on July 7 that the federal government plans to secure at least 1 billion euros ($1.17 billion), about 1.7 trillion won, a year in additional revenue from 2027 through the measure.

Local media reported that the plan is included in the Finance Ministry (BMF) draft federal budget for 2027 and a fiscal plan through 2030. Friedrich Merz’s cabinet has already approved the draft, and an excerpt from the published budget draft includes a plan to secure an additional 1 billion euros for the state coffers in 2027 through “cracking down on financial and tax crimes and introducing cryptocurrency taxation.”

The core is to abolish the tax-free treatment for long-term holdings of cryptocurrencies such as Bitcoin and Ethereum. Until now, gains were not taxed in Germany if cryptocurrencies were sold after 12 months from acquisition. If the system changes as the government envisions, profits from selling personally held cryptocurrencies will be classified as capital gains income and become taxable regardless of the holding period.

The tax overhaul is part of a German government package to reduce the fiscal deficit. The Finance Ministry presented cutting state financial support and various tax benefits, and strengthening crackdowns on financial and tax crimes, as key pillars. The government expects these measures to raise a total of 6.2 billion euros, about 10.7 trillion won, for the 2027 budget. Of that, it calculates 3 billion euros, about 5.18 trillion won, will come from scrapping exemptions and reductions like this one.

Other tax increases are also being pursued. The government plans to collect an additional 1 billion euros from a new tax on single-use plastics, and to raise a further 800 million euros, about 1.38 trillion won, and 400 million euros, about 690 billion won, from higher burdens on tobacco and on alcohol, respectively. The cryptocurrency tax overhaul is positioned within the broader package as a tool to expand tax revenue.

What markets and the industry are watching is the timing, which coincides with MiCA, the European Union’s cryptocurrency regulatory framework. Expectations have risen that access to regulated digital assets will expand across Europe after a recent transition period for MiCA implementation ended, but many platforms still have not secured licenses. Germany is mentioned as the country that has issued the most MiCA approvals so far.

Germany already introduced new requirements in May for cryptocurrency service providers to collect user data and submit it to tax authorities. That has reinforced a trend of tightening both transaction monitoring and tax enforcement. If the abolition of the long-term holding tax exemption is added, the tax burden on crypto investors in Germany could increase further.

The legislative process still remains. The overhaul has not been finalised and must be approved by parliament. The first review could take place in early September and the second in mid-December.

Views within the political sphere are mixed. The Social Democratic Party, which Finance Minister Lars Klingbeil belongs to, supports expanding the crypto tax burden, but the centre-right Christian Democratic Union and Christian Social Union bloc led by Merz has generally opposed the change. A bill with a similar intent was previously blocked once in the Bundestag.

Another source of controversy is that government documents explicitly cite “cracking down on financial and tax crimes and introducing cryptocurrency taxation” as a means to expand tax revenue. The industry is paying attention to the fact that a specific revenue target has been presented for the first time. An assessment has emerged that it broadly matches estimates recently discussed in the sector.

Two key issues to watch going forward are whether the German parliament will actually pass the abolition of the long-term holding tax exemption, and how expanded regulatory access and tighter taxation will be balanced under the MiCA framework. With a direction that both widens regulatory clarity and raises the tax burden, it is expected to have a significant impact on investment behaviour and service providers’ responses in Germany’s crypto market.