Germany to effectively ban trading of crypto derivatives

A new tax regulation in Germany sets a €10,000 limit on losses from cryptocurrency-derivative trades. Residents will be able to offset their personal income tax base by up to that amount. BitcoinExchangeGuide reported, citing local media.

“If a trader realises total profit of €1,000,000 from option trades and total losses of €800,000 in a single year, he will have to pay tax not on a profit of €200,000, but on €990,000,” tax advisers explained.

This is because only €10,000 can be offset against the €800,000 total losses, with €790,000 carried forward to future years, they added.

“In effect, the law essentially bans all derivatives trading from 2021. Traders are still allowed to trade and generate tax debts far in excess of their profits. I am shocked by the malice behind this,” he said.

At the bottom line, this law effectively bans all derivatives trading starting 2021. But it’s even worse than that, because people are still allowed to trade and generate tax debt far in excess of their profit. I’m in shock about the malice behind this (5/6)

— Hasu (@hasufl) December 19, 2020

As others have pointed out, this law is likely unconstitutional and it’s a huge surprise to see it ratified. Expect a wave of lawsuits against German gov + good chance it will be overturned. But this can take months to years, so be careful in the meantime

— Hasu (@hasufl) December 19, 2020

In October, the UK’s Financial Conduct Authority (FCA) banned the sale of crypto-derivatives and cryptocurrency-based exchange-traded notes to retail investors.

Last year, the World Federation of Exchanges, which brings together exchange operators including Intercontinental Exchange (ICE), Nasdaq, Deutsche Boerse, CME Group and the London Stock Exchange Group, urged the FCA to drop the initiative.

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