The BMF letter on crypto assets, in English

A crypto asset is the digital representation of a value or of a right that can be transferred and stored electronically using distributed ledger technology (DLT) or a similar technology.

The technical structure and the technical development of crypto assets take many forms. Since taxation follows the real-life facts that are to be taken as its basis, §§ 1, 88 of the Fiscal Code (Abgabenordnung, AO), the assessment for income tax purposes is to be made according to the function of the crypto asset.

Against this background, the following distinction can be drawn on to tell crypto assets apart:

• Currency or payment tokens are crypto assets that are used as a means of exchange but are also held for speculative purposes. They are not issued or guaranteed by a central bank or public authority and therefore do not have the legal status of a currency, but are, viewed economically, accepted as a means of exchange. The best-known currency tokens include, for example, Bitcoin and Ether. The website https://www.coinmarketcap.com/de lists further examples. The terms "cryptocurrency" (Kryptowährung) and "virtual currency" (virtuelle Währung) are also in use;
• Utility tokens are crypto assets that convey certain rights of use (e.g. access to a network that may still have to be created) or a claim to exchange them for a certain good or service that may still have to be created. Utility tokens can also convey voting rights to change the software and thus the functionality of the good or service;
• Security tokens are crypto assets that, by their function, are comparable to conventional securities.

Crypto assets can also contain a combination of the categories described above (hybrid crypto assets). For classification for income tax purposes, each crypto asset is to be assessed irrespective of its name. For example, a utility token that additionally has the function of a means of exchange would, when used as a means of exchange, be treated for income tax purposes like a currency token.

The particularities of non-fungible crypto assets (so-called non-fungible tokens, NFTs) are not addressed in the present version of the BMF letter. An NFT is assigned an individualizing feature, whereas fungible crypto assets of one trading name (e.g. Bitcoin, Ether) each form a totality of identical and mutually interchangeable units. An NFT is thus a unique crypto asset that is not fungible with other crypto assets. The field of application of NFTs currently includes in particular digital art and collectibles, but is not limited to these.

A blockchain is a database with several participants that is as a rule not subject to any central control and that uses distributed ledger technology (DLT). A distributed ledger is a store of information that is shared across a set of DLT nodes ("nodes", e.g. a computer connected to the internet) and synchronized between the DLT nodes by a consensus mechanism. It is designed so that the entries are tamper-proof and unchangeable and allow only additions. In the context of crypto assets, a blockchain is a decentralized database based on DLT in which, in particular, all confirmed transactions are recorded, comparable to a cash book kept in a decentralized way. These transaction data are grouped in blocks with consecutive numbering, comparable to a chain to whose end new blocks are continually added. The block with which the blockchain begins is called the genesis block or block 0. Each block contains, in the so-called hash value, a long cryptographic character string that is calculated from the content of its predecessor block. The calculation thus also includes the hash value of the predecessor block, which was in turn calculated from the block before it. As a result, a later change to a value that went into the calculation (for example a transaction listed in a block) means that the hash values no longer match those of the unaltered blockchain and the manipulation becomes visible to everyone.

On many blockchains, a consideration in the form of newly issued crypto assets (block reward, Blockbelohnung) is granted for combining transactions into new blocks and appending these to the blockchain, which is usually transferred through so-called coinbase transactions. In these cases, the first transaction of a block is pre-formulated in favor of the block creator. As a rule, the block creators also collect transaction fees for transactions included in the block.

There are different methods for appending a new block. The most widespread at present are proof of work, called mining by analogy with gold digging, and proof of stake. To set it apart from mining, proof of stake is also referred to as forging or minting, that is, as forging metal or striking coins (Schmieden or Prägen), and in part also, in general terms, as staking. In proof of stake, the block creators are called forgers or validators. For the case of block creation by proof of stake, the present letter uses the term forging.

In so-called proof of work, the right to create the block goes to whoever is first to find, by trial and error, a random number (the so-called nonce, "number that can only be used once") which, together with the transactions selected for the block and the hash value of the predecessor block, yields a hash value that begins with a certain number of zeros. By fixing how many zeros the hash value starts with, the difficulty and thus also the duration of the search can be controlled.

Because of the computing power needed to find a nonce by trying out different random numbers, the block creators, referred to as miners, often join together in pools. They each contribute their share of the required computing power by trying to find a hash value within the range of possible nonces assigned to them (mining pool). If crypto assets are paid out in a mining pool, they are distributed among the participating miners according to a fixed key. The operators of the mining pool take on a coordinating role.

In addition, cloud mining services operate so-called server farms that specialize in mining. They sell or rent out shares of their capacity to persons who then use them for mining.

In so-called proof of stake, the next block creator is as a rule selected by a weighted random selection. The chance of being allowed to append a block to the blockchain and of collecting the block reward together with transaction fees rises, depending on the design, e.g. with the length of participation and/or the number of crypto assets committed (the "stake"). The stake is a number of crypto assets that the holders lock for a certain period, so that as a rule they cannot access them, and with which the block creators prove to the network that they have an interest in proper block creation. If errors are made or manipulations are carried out in the creation of a block, the crypto assets committed as stake can, depending on the design of the protocol, be confiscated or deleted where applicable.

According to the basic idea of proof of stake, the block creators (forgers, also called validators) use only their own crypto assets as stake. In many cases, however, persons also provide crypto assets for a stake without themselves taking part in block creation as forgers. As a rule, this is done by taking part in so-called staking pools, which are already provided for as such in the respective blockchain protocol. The crypto assets of the stake are locked in the process, but not transferred. A staking pool has a higher probability of being selected as the next forger. The participants receive remuneration from the forgers, who collect the block reward and the transaction fees. As a rule, so-called claiming is required, that is, the participant actively claiming the remuneration made available in the system. In other cases, the remuneration is credited directly to the participants without any action on their part. Some centralized trading platforms also offer the possibility of taking part in a staking pool (platform staking). In practice, in some cases no distinction is drawn between the activity of the forgers and the mere provision of a stake without taking on block creation, and the term staking is used in general terms for both processes, or a distinction is drawn only between "active staking" and "passive staking". The present letter uses the term (passive) staking for the provision of a stake without taking on block creation.

Every blockchain network consists of different nodes (see paragraph 6) that take on the functions of the network, such as storing a complete copy of a blockchain or creating blocks. A masternode has additional tasks beyond this, such as processing anonymous and confidential transactions or instant transactions. In addition, operators of a masternode are often entitled to take part in decision-making processes on rules for the structure and the operating procedures of blockchains (governance) and to exercise voting rights. Which tasks and voting rights a masternode conveys can differ greatly from blockchain to blockchain and depends on the respective protocol.

Depending on the design of the respective blockchain, the operation of the masternode is also remunerated. To operate a masternode, in most cases a certain number of crypto assets must be tied to it. If the crypto assets are detached from the masternode, it loses its function and the operators lose the right to remuneration.

To receive, hold and transfer crypto assets, a wallet is needed as a rule (but see paragraph 20 on centralized trading platforms).

Translated literally, wallet means purse or billfold. A more accurate translation, however, would be key ring. No crypto assets are held in the wallet itself; these always remain in the blockchain. Rather, it is an application for generating, managing and storing private and public keys.

The public key serves to assign the crypto assets in the underlying blockchain. It is comparable to bank account details (IBAN) or an e-mail address and functions in particular as the receiving address for transactions. On a public blockchain, anyone can normally view the number of crypto assets assigned to a particular public key and all transactions carried out through that key. The private key is known only to the holders. It serves as a password or, as the case may be, to generate digital signatures for transactions (see paragraph 21). There can be several public keys for each private key.

The number of wallets a person has is not limited. As a rule, a separate wallet is needed for each blockchain, since the public keys depend on the underlying blockchain. The wallet is installed on the computer as a software application (software wallet) or is available as a so-called hardware wallet, like an external hard drive or a USB stick. In addition, a wallet can be created by a printout on paper or as an electronic document (paper wallet). Use can also be made of online services where the wallet is accessed through the browser. In these cases, the providers in some instances keep the public and private keys in custody; in some cases, moreover, departing from the description above, a shared wallet is used for a large number of persons.

With the help of a software wallet or a block explorer, a kind of search engine for blockchains, past transactions can be traced. However, the recorded inflow and outflow of the crypto assets need not coincide with the time of acquisition or disposal that is relevant for income tax purposes. The background is that crypto assets are regularly traded through so-called centralized trading platforms (centralized exchanges, CEX) such as, for example, Kraken, Coinbase, Bitpanda or Bison. Here, crypto assets are transferred to the personalized account of a centralized trading platform and are booked back to one's own wallet only at a time that follows the disposal or acquisition through the platform. The time of the trade through the centralized trading platform is then decisive for the time of acquisition or disposal. The same applies where taxpayers do not use a wallet of their own but hold and trade the crypto assets exclusively through a centralized trading platform.

On decentralized financial markets (often called decentralized finance, DeFi for short), market participants are meant to be able to interact directly with the blockchain without an intermediary being interposed. On such decentralized financial markets, financial services are offered that are based on the programmability of the underlying blockchain and are often implemented by so-called smart contracts. Smart contracts (literally: "intelligent contracts") are not contracts in the legal sense. Rather, they are program codes stored on the respective blockchain that automatically carry out certain interactions depending on the occurrence of previously defined events, e.g. the transfer of a certain crypto asset A on receipt of a certain quantity of crypto assets B. So-called decentralized trading platforms (decentralized exchanges, DEX) merely provide the infrastructure of the programmed blockchain. Trading takes place through a chain of smart contracts that enable users, for example, to provide crypto assets for exchange (peer-to-peer, peer-to-pool).

In a blockchain transaction, a data unit is first created that contains the hash value of the recipient's public key, a hash value over the data unit of the previous transaction(s) and a signature over both hash values generated with the private key. The transaction generated in this way is then sent to a (memory) pool. Persons who operate a node (see paragraph 6) with a block creation function take the transaction data from there, check by means of the signature that the transaction is in order, and then append it to the blockchain with a new block, whereby the transaction takes effect. If the recipient wants to transfer the crypto assets onward, a further transaction confirmed with a private key is required for this.

The processes described can also run in an automated way. One practical use case is the use of debit credit cards (Debit-Kreditkarten), for the use of which taxpayers provide crypto assets and can in this way use them for payments with the credit card: the credit card company exchanges the crypto assets into euros or another state currency and settles the payment of the purchase price.

To determine the holdings of crypto assets assigned to a public key, two methods in particular are used. For Bitcoin and some other crypto assets (in particular Cardano), the holdings are recorded as the sum of the "unspent transaction outputs" (UTXO). In this method, the incomings (inputs) and the outgoings (outputs) are set against each other. Units of value (coins) are formed for each input and output. If only parts of a coin are disposed of, the remaining part flows back to one's own public key as "change" (Wechselgeld, or "change output").

Example: A acquired 0.01 Bitcoin in a first transaction and 0.02 Bitcoin in a further transaction. The holdings of unspent transaction outputs (UTXOs) amount to 0.03 Bitcoin. A now disposes of 0.025 Bitcoin to B. Three outputs are required to settle this:

1. Output of 0.025 Bitcoin to B
2. Output of 0.001 Bitcoin as transaction fee
3. Output of the remaining holdings ("change") of 0.004 Bitcoin back to A

The second method of determining holdings, which is used for example for Ether, EOS and Tron, is based, much as with a bank account, on the booking of incomings and outgoings in a holdings account (accounting), so that the holdings are continually calculated from increases or decreases in holdings.

The term initial coin offering (ICO) is modeled on the English term initial public offering (IPO). An IPO is to be understood as a stock market flotation in which shares from existing holdings or from a capital increase are offered on the capital market. However, whereas shares are sold in such an initial placement, an ICO is about the issue of crypto assets in exchange for other crypto assets or units of a state currency (e.g. euros). In an ICO, as in a stock market flotation, capital is raised.

In lending, crypto assets are handed over for use in return for remuneration.

Fork means the forking or splitting of a blockchain and its crypto assets. In the field of income tax law, it is primarily the so-called hard fork that is relevant. Crypto assets rest to a decisive degree on the "open source idea". That is, the source code of the blockchain is published and can be used and changed free of charge. As a result, the source code can be viewed, downloaded and changed by anyone and can, in the further course, develop in a direction which the original developers do not wish to support but which is by now favored by a majority or at least a relevant minority. Differences of opinion on the further design of the blockchain can thus arise within the network which, following the open source principle, can only be resolved by consensus. If no consensus can be found, this leads to the splitting of the blockchain. In this way an additional version of the blockchain, and thus of the blockchain's crypto assets, comes into being, which exists alongside the original blockchain and its crypto assets. After the split, the two blockchains continue to develop separately. In the course of the split, the holders of the crypto assets of the blockchain that existed before the hard fork thus obtain the same number of crypto assets of the new blockchain without having to provide any consideration for them.

In a so-called soft fork, too, the blockchain underlying the respective crypto asset is developed further. However, since in these cases all nodes can continue to process all blocks, there is no split of the blockchain or of its crypto assets.

In an airdrop, crypto assets are distributed "free of charge" (unentgeltlich). As a rule, these are marketing campaigns, the design of which can differ. An airdrop can, e.g., come with the condition that the participants must fill in several online forms. In this way, customer data can be collected. For other airdrops, it is required that the project be promoted on social networks. In larger airdrops, sometimes only some of the participants who meet the conditions receive the crypto assets to be distributed, for instance on the basis of a random selection. However, an airdrop can also take place in such a way that crypto assets are transferred to a public key (see paragraph 18) entirely without any action on the part of its holder.

Centralized trading platforms and wallet providers as a rule make available to their users, for download, lists of the transactions those users have carried out on the respective trading platform or with the wallet (transaction overviews, Transaktionsübersichten). Both structured file formats (database formats such as, e.g., csv, xml, db or accdb files) and unstructured ones (document format such as, e.g., a PDF file) are common, the latter as a rule being broken down by crypto asset and ordered chronologically. It is regularly technically possible to suppress individual data records on export or to make subsequent changes. With some providers, the possibility of retrieving the transaction overviews is limited in time, so that users must take care to retrieve them in good time.

Various private-sector providers offer so-called tax reports (Steuerreports). They advertise that they determine a taxpayer's income in connection with crypto assets (e.g. income from private sales, other income from services) and resemble, in their outward form, the tax certificates issued by credit institutions. Depending on the provider, different report settings can be chosen. As a rule, tax reports build on wallet information or on transaction overviews of one or more trading platforms (see paragraph 29a), which are selected and provided by the taxpayers. Their completeness therefore depends substantially on the underlying data. The results can be adjusted manually by the taxpayers, primarily to correct missing or wrongly transferred values (e.g. cost basis, acquisition date), but sometimes also with regard to the income tax parameters or the valuation of individual transactions.

Activities in connection with crypto assets can, depending on the circumstances of the individual case and taking into account the explanations below, lead to income of any type of income (§ 2 Abs. 1 Satz 1 of the Income Tax Act, EStG). In particular, income from a commercial business (Gewerbebetrieb; § 15 EStG), capital income (§ 20 EStG), income from private sales (§ 22 Nr. 2 in conjunction with § 23 EStG) or other income (§ 22 Nr. 3 EStG) come into consideration.

The individual crypto assets are assets (Wirtschaftsgüter) (BFH judgment of 14 February 2023, IX R 3/22, BStBl II p. 571). They confer the possibility of assigning the benefits of monetary value that are assigned to one's own public key to another public key. They are capable of being valued on their own by means of their market price, which can as a rule be determined through trading platforms (e.g. Börse Stuttgart Digital Exchange, Kraken, Coinbase and Bitpanda) and lists (e.g. https://www.coinmarketcap.com/de and https://www.coingecko.com/de).

Assets are to be attributed to the owner. The beneficial owner (wirtschaftlicher Eigentümer) is whoever can initiate transactions and so "control" the assignment of the crypto assets to public keys. This is as a rule the holder of the private key (BFH judgment of 14 February 2023, IX R 3/22, BStBl II p. 571). It does not, however, prevent attribution to the beneficial owner if transactions are initiated through platforms that manage private keys or use them on that owner's instruction (see paragraph 19).

Mining and forging are acquisitions. Acquisition is obtaining, for consideration, an existing or already present asset from third parties; production (Herstellen), by contrast, is creating an asset that does not yet exist or having it created (BFH judgment of 2 May 2000, IX R 73/98, BStBl II p. 614 and of 2 September 1988, III R 53/84, BStBl II p. 1009). The crypto assets paid out to block creators for creating blocks are indeed put into circulation for the first time in the course of block creation, but all of them were already laid down when the genesis block of the blockchain was created. Block creators have no influence on the properties of the new crypto assets that are released. Block creation is thus to be distinguished from the case of the issuer in an ICO, who decides on the design of the crypto assets to be distributed and therefore also produces them. The entirety of the persons who have rights in the blockchain grants the released crypto assets in exchange for the block creators' service. The transaction fees, too, are paid in exchange for the block creators' service. In both cases the crypto assets are therefore obtained for consideration from third parties.

Depending on the circumstances of the individual case, mining and forging can be a private or a commercial (gewerblich) activity. The receipts include both the block reward and the transaction fees received.

If the income from block creation is not already to be classified as income from a commercial business by virtue of legal form, its classification as a commercial activity depends on whether the requirements of a commercial business under § 15 Abs. 2 EStG are met.

Block creation is sustained (nachhaltig) if it is designed to be repeated (see H 15.2 (Wiederholungsabsicht) of the Official Income Tax Handbook (Amtliches Einkommensteuer-Handbuch, EStH) 2023).

It must be suited in the long term to making a profit from this activity (see H 15.3 (Totalgewinn) EStH 2023).

Block creators already take part in general economic life by making their computing power available to the network participants for verifying the transaction data and including it in a new block of the blockchain that is to be created. That the payment depends on the block being created successfully does not stand in the way of taking part in general economic life.

Block creation is not private asset management (private Vermögensverwaltung). In both mining and forging, block creators receive the block reward and the transaction fees in exchange for creating new blocks. The activity thus matches the picture of a service provider.

Where blocks are created through a mining pool, a co-entrepreneurship (Mitunternehmerschaft) may exist at the level of the mining pool in the individual case, depending on the contractual arrangement. The general principles for assuming a co-entrepreneurship apply (see H 15.8 (1) (Allgemeines) EStH 2023). In any case there is no co-entrepreneurship if individual miners merely make computing power available to the operators of the mining pool for payment under a service relationship. A staking pool as a rule does not constitute a co-entrepreneurship.

On the status of crypto assets as assets see paragraph 31. Crypto assets are non-depreciable assets of a tangible kind which, under the general principles of tax accounting law, are to be allocated to fixed assets (Anlagevermögen) or current assets (Umlaufvermögen). If allocated to fixed assets, they are to be shown under financial assets within the meaning of § 266 Abs. 2 A. III. of the Commercial Code (Handelsgesetzbuch, HGB), and if allocated to current assets, under other assets within the meaning of § 266 Abs. 2 B. II. 4. HGB.

The crypto assets allotted for block creation and as a transaction fee are acquired (exchange-like transaction, see also paragraph 33).

The cost basis equals the market price at the time the crypto assets are acquired (derived from § 6 Abs. 6 Satz 1 EStG). The price of a trading platform (e.g. Börse Stuttgart Digital Exchange, Kraken, Coinbase and Bitpanda) or of a web-based list (e.g. https://www.coinmarketcap.com/de and https://www.coingecko.com/de) may be used as the market price. On no objection being raised to the use of a daily price instead of the price at the time of acquisition, see paragraph 91.

Where profit is determined by cash-basis accounting under § 4 Abs. 3 EStG, the addition of crypto assets in an exchange-like transaction leads to business receipts (Betriebseinnahmen). Crypto assets, as non-securitized claims and rights comparable to securities, are to be regarded as assets within the meaning of § 4 Abs. 3 Satz 4 EStG, whose cost basis (§ 6 Abs. 6 EStG, see paragraph 43) is to be deducted as business expenses (Betriebsausgaben) only at the time the disposal proceeds are received or, in the case of withdrawals (Entnahmen), at the time of the withdrawal. The assets are to be entered in the registers that are to be kept on an ongoing basis under § 4 Abs. 3 Satz 5 EStG.

Income from block creation that cannot be attributed to any other type of income is taxable as a service (Leistung) under § 22 Nr. 3 EStG. This can be the case, for example, where there is no commercial activity within the meaning of § 15 Abs. 2 EStG because the activity is not sustained (see paragraph 36). It is not subject to income tax if, together with other income from services, it amounted to less than €256 in the calendar year (§ 22 Nr. 3 Satz 2 EStG).

Any conduct of the taxpayers, of whatever kind, whether active, passive or non-economic, can be a service. In linking service and consideration, no synallagmatic (reciprocal) relationship between service and consideration is required. Those providing the service (here: the block creators) need not already expect consideration when they provide their service. Rather, it is enough that they accept as such a (counter-)service granted in economic connection with their conduct (doing, tolerating, refraining). In this way they assign their conduct to the sphere of gainful activity, which is therefore also the sphere that matters for tax law (BFH judgment of 24 April 2012, IX R 6/10, BStBl II p. 581). In this respect no distinction is to be made between the block reward and the transaction fees. This also applies to taking part in mining and staking pools and to a participation in a cloud mining service.

The crypto assets obtained by way of block creation are to be valued under § 8 Abs. 2 Satz 1 EStG at the market price at the time of acquisition (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91). Deductible expenses (Werbungskosten) can include, for example, expenditure on acquiring the necessary hardware and software (where applicable in the form of depreciation) and on electricity consumption.

Receipts from (passive) staking as the term is understood here, namely providing a stake without oneself taking part in block creation as a forger (taking part in a staking pool, platform staking; see paragraph 13), are generally subject to taxation under § 22 Nr. 3 EStG as the drawing of yield (Fruchtziehung) that falls under private asset management. In exchange for their service (temporarily giving up the use of the crypto assets), the taxpayers receive consideration in the form of additional crypto assets (see paragraph 46). The crypto assets obtained are to be valued at the market price at the time of acquisition (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91).

For reasons of simplification, no objection will be raised if, during the year, the time of booking into the wallet (claiming, see paragraph 13) is taken as the time of acquisition or of addition of the crypto assets received from (passive) staking. The addition of crypto assets not yet claimed is to be taken into account at the end of the financial year/calendar year at the latest.

To the extent that the locked crypto assets belong to business assets (Betriebsvermögen), the consideration constitutes business receipts. The crypto assets received for (passive) staking are to be capitalized (increasing profit) at the market price at the time of addition (see paragraphs 43, 48a and 91).

To the extent that taxpayers earn returns from a masternode or other node, the explanations on block creation by way of proof of stake in paragraphs 33 to 39 apply accordingly.

If the crypto assets are business assets, the disposal proceeds are business receipts. In determining the gain on disposal, the individual cost basis of the crypto assets disposed of, carried forward where applicable, is to be deducted. This may be departed from if, in the individual case, the individual cost basis cannot be determined and individually allocated. In that case the crypto assets may be valued at the average cost basis.

If crypto assets are repeatedly bought and sold (including swapping them for other crypto assets), such trading can constitute a commercial activity. To distinguish it from private asset management, the criteria for commercial trading in securities and foreign currency can be drawn on (see H 15.7 (9) (An- und Verkauf von Wertpapieren) EStH 2023).

Crypto assets are "other assets" within the meaning of § 23 Abs. 1 Satz 1 Nr. 2 EStG (BFH judgment of 14 February 2023, IX R 3/22, BStBl II p. 571; see paragraph 31). Gains from the disposal of crypto assets held as private assets can therefore constitute income from private sales under § 22 Nr. 2 in conjunction with § 23 Abs. 1 Satz 1 Nr. 2 EStG if the period between acquisition and disposal is not more than one year (on the special income tax features of utility and security tokens see paragraphs 77 ff.). The intention to generate income does not need to be examined here, since it is already objectively established by the disposal within the period. The gains remain tax-free under § 23 Abs. 3 Satz 5 EStG, however, if the sum of the gains made from all private sales in the calendar year (total gain) is less than €1,000 (up to assessment period 2023: €600).

An acquisition and a disposal are required. An acquisition means obtaining something from third parties for consideration. This includes in particular the crypto assets obtained in connection with block creation (see paragraph 42) and, where applicable, those obtained through an ICO or airdrop (see paragraph 75). Also obtained for consideration are all crypto assets that taxpayers have obtained in exchange for units of a state currency (e.g. euros), goods or services, or for other crypto assets, as well as the crypto assets obtained through lending and (passive) staking. As the mirror image of acquisition, the transfer for consideration of the acquired asset to third parties constitutes a disposal. Swapping crypto assets for units of a state currency (e.g. euros), goods or services, or for other crypto assets, accordingly leads to a disposal.

The holding periods (Veräußerungsfristen) of § 23 Abs. 1 Satz 1 Nr. 2 EStG start anew after each swap. To determine the one-year holding period for an acquisition or disposal through a centralized trading platform, the times recorded there are to be used. For a direct acquisition or direct disposal without intermediaries in between, for instance through a decentralized trading platform, the times that result from the wallet are, for reasons of simplification, generally to be used. If the contractual transaction creating the obligation (schuldrechtliches Verpflichtungsgeschäft) is to be decisive for the question of whether the one-year holding period has been exceeded, the taxpayers must prove the time the contract was concluded by suitable documents.

If taxpayers dispose of crypto assets whose holdings are determined under the UTXO model and for which, for a part not disposed of, "change" (or "change output") flows back to their own public key (see the example in paragraph 23), the original acquisition data of the crypto assets disposed of are carried forward for this part for tax purposes.

The gain or loss from the disposal of crypto assets is the disposal proceeds less the cost basis and the deductible expenses. Deductible expenses are to be split between taxable and non-taxable private sales. Non-taxable private sales exist, for example, where the disposal takes place outside the periods of § 23 EStG (see paragraph 55).

For a disposal in euros, the agreed purchase price is to be taken as the disposal proceeds. If crypto assets are swapped for other crypto assets, the market price of the crypto assets received at the time of the swap is to be used as the disposal proceeds of the crypto assets given up (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91). If a market price of the crypto assets received cannot be determined, no objection will be raised if the market price of the crypto assets given up is used instead.

The market price of the crypto assets given up, plus any incidental acquisition costs paid, is at the same time the cost basis of the crypto assets received. The transaction fees spent in connection with the disposal are to be taken into account as deductible expenses.

If crypto assets are given up in exchange for a service or goods, the payment agreed in euros is to be used as the disposal proceeds of the crypto assets given up. If no payment was expressly put in figures, the market price of the crypto assets given up is to be used as the disposal proceeds.

For determining the order of use of the crypto assets disposed of, the principle of looking at each item individually (Einzelbetrachtung) applies (see paragraph 51). If looking at each item individually is not possible, then for the purposes of the holding period the crypto assets of a trading name (e.g. Bitcoin or Ether) that were acquired first count as disposed of, and the average method is to be applied for the valuation (BFH judgment of 24 November 1993, X R 49/90, BStBl II 1994 p. 591). For reasons of simplification it may be assumed, for the purposes of the valuation, that the crypto assets of a trading name that were acquired first were disposed of first (First in First out, FiFo).

A wallet-by-wallet view applies. Within a wallet, the method chosen is to be kept until all crypto assets of a trading name in that wallet have been disposed of in full. After the crypto assets of a trading name held in the wallet have been disposed of in full and crypto assets of that trading name are then newly acquired, the method may be changed (right to choose). Where crypto assets with different trading names are held through one wallet, there is a separate right to choose for each.

For currency or payment tokens (see paragraph 3), the extension of the holding period under § 23 Abs. 1 Satz 1 Nr. 2 Satz 4 EStG does not apply.

Returns from handing over crypto assets that are allocated to business assets are business receipts. Crypto assets received for handing them over for use are acquired and are to be valued at the market price at the time of addition (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91; on claiming, see paragraph 48a). On cash-basis accounting see paragraph 44.

Income from lending is taxable under § 22 Nr. 3 EStG. Earning income by handing assets over for use for a time rests on a service of the taxpayers. Crypto assets received for handing them over for use are acquired and are to be valued at the market price at the time of receipt (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91; on claiming, see paragraph 48a). For the disposal of the crypto assets received for handing them over for use, reference is made to the explanations in paragraphs 53 ff.

If crypto assets are business assets and a hard fork gives rise to crypto assets of a new blockchain that are likewise business assets, the crypto assets of the different blockchains are different assets.

With crypto assets, taxpayers always receive the possibility of receiving the same number of additional crypto assets of the new blockchain in the course of a hard fork of the underlying blockchain. Where crypto assets are acquired (see in particular paragraph 42), there is consequently always also an acquisition with regard to the crypto assets of the new blockchain created by a later hard fork. The cost basis of the crypto assets existing before the hard fork is to be split between these assets. The split follows the ratio of the market prices of the different crypto assets at the time of the hard fork (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91). To the extent that no value can be attributed to the crypto assets of the new blockchain after a hard fork, the cost basis stays with the crypto assets existing before the hard fork. On cash-basis accounting see paragraph 44.

A hard fork does not lead to income under § 22 Nr. 3 EStG. If, however, the new crypto assets created by a fork are disposed of, the gains made are to be taxed as income from private sales under § 22 Nr. 2 in conjunction with § 23 Abs. 1 Satz 1 Nr. 2 EStG, provided the crypto assets existing before the hard fork were acquired and the period between the acquisition of the original crypto assets and the disposal is not more than one year (see paragraphs 67 and 53 ff.). On splitting the cost basis see paragraph 67. The acquisition date of the new crypto assets is the acquisition date of the crypto assets existing before the hard fork.

To the extent that the receipt of crypto assets is occasioned by the business, there are business receipts (Betriebseinnahmen). The crypto assets are to be valued at the market price at the time of addition (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91). In cases in which no market price can yet be determined at the time of addition, no objection will be raised if the crypto assets received in an airdrop are recognized at €0. On cash-basis accounting (Einnahmenüberschussrechnung), see paragraph 44.

The receipt of additional crypto assets can lead to other income from a service (Leistung) within the meaning of § 22 Nr. 3 EStG. Despite the marketing character of many airdrops, this is the case where those interested have to render a service (see paragraph 46), in particular therefore in the case of active conduct such as naming the airdrop or the project initiator in posts on social media. Taxpayers also render a service within the meaning of § 22 Nr. 3 EStG if they upload their own images, photos or videos to a platform and receive crypto assets for doing so, even if ownership of the images, photos or videos remains with the taxpayers.

If the allocation of the crypto assets depends on taxpayers providing data about themselves that goes beyond the information required for the plain technical allocation or provision, the handing over of data is a service by the taxpayers within the meaning of § 22 Nr. 3 EStG, for which they receive crypto assets as consideration. This is to be assumed in any event where taxpayers are obliged, or have to declare themselves willing, to provide personal data in connection with an airdrop. Unlike participation in classic discount schemes or games of chance, for which among other things a postal address has to be given for identification reasons, the taxpayers' public key is sufficient for the allocation of an airdrop.

If the airdrop is designed so that, besides a service, "chance" also decides whether crypto assets are received (see paragraph 29), the attributional link between service and consideration is interrupted or overlaid by the "element of chance".

The crypto assets are to be recognized at the market price at the time they are obtained (on determining the market price, see paragraphs 43 and 91). In cases in which no market price can yet be determined at the time they are obtained, no objection will be raised if the crypto assets received in an airdrop are recognized at €0.

If the allocation is not made in an economic connection with a service, a gift comes into consideration, for which the rules of gift tax law are to be observed.

If crypto assets are allocated on the basis of a service within the meaning of § 22 Nr. 3 EStG, there is also an acquisition. The cost basis is to be recognized at the value of the data handed over or of the act performed. It may be presumed, subject to rebuttal, that the value of the data handed over or of the act performed corresponds to the market price of the consideration (on determining the market price and on no objection being raised to a daily price, see paragraphs 43 and 91, and on recognition at €0 where no market price can be determined, see paragraph 73). Because of the acquisition, the later disposal of the allocated crypto assets can be subject to tax as a private sale (unless there is capital income); reference is made to the explanations in paragraphs 53 ff. Where assets are obtained free of charge, the acquisition by the legal predecessor is decisive (§ 23 Abs. 1 Satz 3 EStG).

In an ICO, crypto assets are issued by the issuer itself. In the issuer's business assets they can, depending on their design, be either equity (capital made available permanently) or debt (capital made available for a limited time). For income tax purposes they are to be classified according to their legal substance. The income tax treatment follows the general principles. The crypto assets issued are, for the issuer, self-produced assets (Wirtschaftsgüter), which are to be capitalized at production cost. When they are swapped, e.g. for other crypto assets, or disposed of, the issuer realizes a gain or a loss, unless corresponding liabilities or capital amounts are to be recognized on the liabilities side. In the individual case it is to be examined whether the terms of issue of the crypto assets give rise to contractual obligations towards the holders of the crypto assets which, to the extent that the requirements are met, would have to be shown as a liability or provision.

For the evaluation under income tax law, a distinction is to be made as to whether the crypto assets grant their holders a special legal position. They may have to be shown in the balance sheet as assets under financial assets (Finanzanlagen) or as receivables. The general accounting principles apply to the further evaluation. On cash-basis accounting, see paragraph 44.

The income tax classification of the returns depends on which rights and claims are conveyed in the individual case.

If utility tokens are redeemed, this is irrelevant for income tax purposes (BFH judgment of 6 February 2018, IX R 33/17, BStBl II p. 525). There is no disposal, because there is no transfer to third parties for consideration, where only the claims to a product or a service embodied in the utility tokens are redeemed and the goods or the service are received by using the utility tokens.

If acquired utility tokens are disposed of, there may be income from private sales under § 22 Nr. 2 in conjunction with § 23 Abs. 1 Satz 1 Nr. 2 EStG. This also applies if utility tokens are used as a means of exchange (hybrid tokens). Reference is made to the corresponding explanations in paragraphs 53 ff.

Depending on their design, crypto assets may also be regarded as securities or other financial instruments.

The income tax classification of the current income under § 20 Abs. 1 Nr. 1 or Nr. 7 EStG and of the gains on disposal under § 20 Abs. 2 Satz 1 Nr. 1 or Nr. 7 EStG depends on the design of the crypto assets in the individual case.

If the right conveyed is a bond (Schuldverschreibung), the income tax classification of the returns or gains resulting from it depends on whether a capital claim (Kapitalforderung) within the meaning of § 20 Abs. 1 Nr. 7 EStG or a mere claim to delivery in kind (Sachleistungsanspruch) is created in that respect.

If the bond conveys exclusively a claim to delivery of a fixed quantity of crypto assets deposited with the issuer, or a claim to payment of the proceeds from their disposal by the issuer, there is no capital claim within the meaning of § 20 Abs. 1 Nr. 7 EStG but a claim to delivery in kind. The BFH case law on Xetra-Gold bearer bonds (BFH judgments of 12 May 2015, VIII R 35/14, BStBl II p. 834 and VIII R 4/15, BStBl II p. 835, BFH judgment of 6 February 2018, IX R 33/17, BStBl II p. 525) and the BFH case law on Gold Bullion Securities (BFH judgment of 16 June 2020, VIII 7/17, BStBl II 2021 p. 9) are to be applied accordingly.

The disposal of such a bond leads, where applicable, to income from private sales under § 22 Nr. 2 in conjunction with § 23 Abs. 1 Satz 1 Nr. 2 EStG. Reference is made to the corresponding explanations in paragraphs 53 ff. Benefits provided by the issuer during the term of the bond are, for the investor, other income within the meaning of § 22 Nr. 3 EStG. The crypto assets granted are to be valued at the time of receipt.

If, by contrast, the bond is a capital claim within the meaning of § 20 Abs. 1 Nr. 7 EStG, returns collected while it is held lead to capital income (current capital returns). A disposal of the bond falls within the scope of § 20 Abs. 2 Satz 1 Nr. 7 EStG. For receipts not received in euros, § 20 Abs. 3 and § 20 Abs. 4 Satz 1 Halbsatz 2 EStG are to be observed.

With regard to the duties to file tax returns, to cooperate (Mitwirkungspflicht) and to keep records, too, the technical particularities of crypto assets are to be taken into account. For example, transactions can take place directly "on chain", that is, be initiated in the network by a transaction (in the case of the block reward: by the protocol) and documented in a new block (see paragraph 21). This direct blockchain access also underlies decentralized trading platforms (DEX, see paragraph 20a). The information documented in this way in a public blockchain can as a rule be viewed by anyone, but because of the pseudonymization through public keys (see paragraph 18) it does not allow direct conclusions about the identity of individual taxpayers. The corresponding information continues to fall within the information sphere of the taxpayers, who are in that respect closer to the evidence. Handing over the public key alone without further details is therefore not sufficient as proof for income tax purposes. If the public key is communicated in addition, however, it can be used to check the correctness and completeness of statements and records. If crypto assets are traded on a centralized trading platform (CEX, see paragraph 20), individual transactions are as a rule not documented in the blockchain, but only in the trading platform's records of the balances of the user accounts. This information, too, falls within the taxpayers' sphere.

The statements in tax returns are to be made truthfully to the best of one's knowledge and belief (§ 150 Abs. 2 AO). Taxpayers are obliged to cooperate in establishing the facts (see §§ 90, 93, 97 AO and § 12 of the Tax Haven Defence Act (Steueroasenabwehrgesetz, StAbwG)). The tax authority's duty to investigate of its own motion (Amtsermittlungspflicht, § 88 AO), which is subject to the principle of proportionality, and the duty of the parties to cooperate stand in principle side by side (BFH judgment of 15 February 1989, X R 16/86, BStBl II p. 462).

If crypto assets are acquired or disposed of through centralized trading platforms of a foreign operator, this gives rise to an extended duty to cooperate on the part of the taxpayers under § 90 Abs. 2 AO. Beyond the disclosure of the relevant facts and the naming of the known evidence owed under § 90 Abs. 1 AO, taxpayers have in these cases to clarify the facts and procure the necessary evidence. This includes in particular the regular and complete retrieval of the transaction overviews of centralized trading platforms (CEX, see paragraphs 20 and 29a). Missing records and data losses (e.g. because of the trading platform's insolvency or because of a hacker attack) are to the taxpayers' detriment. § 90 Abs. 2 AO as a rule applies equally where crypto assets are acquired or disposed of through decentralized trading platforms (DEX, see paragraph 20a). For here, too, because the network nodes of a blockchain are located internationally and the swap partners are selected without regard to where they are resident, foreign actors are as a rule involved.

If taxpayers use tax reports, the following applies, subject to chapters III 2 and III 3: income must be declared completely and correctly and must be traceable for the tax authority. Income is traceable for the tax authority if it can determine and calculate it from the documents and details available. In the course of the assessment, traceability can also be ensured by tax reports if these appear plausible when processed because there are no indications of incompleteness (e.g. the obvious absence of individual cost bases, wallets or trading platforms), they are consistent in themselves (e.g. because statements do not contradict each other) and they do not stand in outward contradiction to other findings of the tax authority (e.g. on other income, the origin of funds, further tax reports or transaction overviews). For sufficient plausibility, extracts of the report settings to determine the facts on which they are based (e.g. prices applied and order-of-use methods used such as FiFo, see paragraph 61), as well as explanations of the underlying income tax evaluations, are also regularly required. Adjustments and corrections do not as a rule stand in the way of plausibility if they have been marked and are traceably reasoned (e.g. because of missing cost bases or acquisition dates on transfers to other trading platforms). A tax report that appears plausible can be taken as the basis of the assessment. In these cases the tax authority may dispense with the need for further investigation of the facts or confine itself to examining individual transactions (in particular manually adjusted entries). §§ 88 Abs. 2 Satz 1, 145 ff. AO and the possibility of a more extensive review (in particular in a tax audit (Außenprüfung)) remain unaffected.

If valuation uses not market prices at the time of acquisition or of the swap but daily prices determined according to documented rules, these can until further notice be taken into account by the tax authority as a basis of taxation, as long as a consistent valuation is ensured. The daily price may in particular be the daily average price, the price at a time of day or the daily closing price. The daily average price is the average of all market prices of a crypto asset from one price source (see paragraph 43) on one price day; the price at a time of day is the market price of a crypto asset from one price source at a time of day that stays the same; the daily closing price is the last market price of a crypto asset from one price source on a calendar day. The valuation is not consistent, for instance, where daily prices are applied both for cost basis and for disposal prices, but different sources or times are used to determine them (e.g. cost basis taken from the web-based list with the highest market prices and disposal prices from the web-based list with the lowest, see paragraph 43). Corrections of individual values that were, for example, determined incorrectly because of differing names in the source used as a rule leave consistency unaffected. If taxpayers use tax reports from several providers, each tax report is to be judged separately for the consistency of the valuation.

To the extent that the tax authority cannot determine or calculate the bases of taxation, it has to estimate them under § 162 AO. This applies in particular where taxpayers have not given sufficient details or sufficient clarification of their statements and the tax authority cannot determine the bases of taxation with sufficient certainty in another way either. The aim of the estimate is to come as close as possible to the actual circumstances (BFH judgment of 29 May 2008, VI R 11/07, BStBl II p. 933). If isolated details or proofs are missing, the documents and data otherwise submitted by the taxpayer to show plausibility are in any event to be considered in the estimate. In the individual case, transaction overviews and tax reports provided by trading platforms or wallet providers (see paragraphs 29a to 29b) can therefore also be a reference point for a realistic estimate. An estimate must not serve to penalize taxpayers.

Bookkeeping and record-keeping duties under tax law arise from the Fiscal Code (Abgabenordnung) (e.g. § 90 Abs. 3, §§ 141, 143 to 144 AO), from the Tax Haven Defence Act (§ 12 StAbwG) and from individual tax acts (e.g. § 22 UStG and § 4 Abs. 3 Satz 5 EStG for cash-basis accounting).

Under § 140 AO, the bookkeeping and record-keeping duties outside tax law that are of significance for taxation are also to be fulfilled for tax law. Bookkeeping and record-keeping duties outside tax law arise in particular from §§ 238 ff. HGB and from the principles of proper bookkeeping under commercial law (Grundsätze ordnungsmäßiger Buchführung, GoB) referred to there.

Besides the books, records and documents on business transactions kept under tax law and outside it, all documents are to be retained that are of significance in the individual case for understanding and checking the records prescribed by law for taxation. Besides documents on paper, these also include all documents in electronic form (e.g. data, data sets and electronic documents) which document that the rules of order were implemented and that compliance with them was monitored.

§§ 145 to 147 AO apply to the bookkeeping and record-keeping duties, the records otherwise required and the documents required to understand them, and to their retention. In particular, the entries and the required records are to be made individually, completely, correctly, in good time and in order under § 146 Abs. 1 Satz 1 AO and, under § 146 Abs. 4 AO, not in a way that no longer allows changes to them to be detected.

Further explanations follow from the principles for the proper keeping and retention of books, records and documents in electronic form and for data access (GoBD, BMF letter of 28 November 2019, BStBl I p. 1269, amended by BMF letter of 11 March 2024, BStBl I p. 374).

If special software is used to fulfil the bookkeeping and record-keeping duties in connection with crypto assets, procedural documentation (Verfahrensdokumentation) is to be drawn up for it in addition to compliance with the rest of the GoBD, see points 32 and 151 ff. of the GoBD, and in particular the principles of immutability and completeness are to be observed (see § 146 Abs. 4 AO and points 107 ff. of the GoBD).

Anyone who keeps books, records and documents subject to retention under § 147 Abs. 1 AO wholly or partly by means of a data processing system has to observe, in a tax audit (§ 193 Abs. 1 AO), the provision on the right of data access under § 147 Abs. 6 AO. Special software (see paragraph 98), too, falls under the tax administration's right of data access under § 147 Abs. 6 AO if and to the extent that record-keeping or retention duties are fulfilled with it. In addition, in a tax audit the handing over of documents not subject to retention can be demanded under § 200 Abs. 1 Satz 1 and 2 AO in order to establish the facts relevant for tax.

Subject to paragraph 105, the general duties to cooperate in paragraphs 87 to 92 apply in private assets. The tax authority may, observing the general rules on the burden of proof, call on taxpayers to provide proof, for instance by using questionnaires.

Tax reports that appear plausible (see paragraphs 29b and 90) can in particular help the tax authority to trace the income declared by taxpayers. The tax authority may request the documents and files used to produce the tax reports (e.g. transaction overviews or CSV files). To check individual details (e.g. a particular acquisition), once its own means of investigation have been exhausted, e.g. the use of a block explorer (see paragraph 20), requesting screenshots, for instance from a wallet or from the account on a centralized trading platform, is also proportionate.

Besides tax reports, structured lists or tables can also serve to make taxpayers' statements traceable. This includes taxpayers' own overviews as well as transaction overviews from centralized trading platforms and wallet providers (see paragraph 29a). When crypto assets are traded, for the correct determination of income from private sales they should ensure that each private sale can be traced individually and on its own, that is, they should at least show the full name or the ticker symbol and the number of the crypto assets concerned in each case, the gain with the cost basis and the disposal proceeds stated, or the time and respective price of the purchases and sales, and their holding period. For other income from services (e.g. lending), subject to the recognition of a tax report, the correct determination for tax purposes requires that the start, end, object, payment and terms of the lending are known. Paragraph 101 applies accordingly.

Depending on the complexity and the number of transactions, the taxpayers' presentations under paragraph 102 may in addition include, e.g., the following documents and data together with the related supporting documents, and missing details may be requested by the tax offices:

• time of acquisition, quantity acquired and type of acquisition (e.g. purchase/swap, ICO, mining/forging, (passive) staking, lending; for an airdrop, to determine whether there is a service, a description of the conditions that were decisive for the allocation of the crypto assets) and the trading platform used (see paragraphs 70 ff.);
• cost basis, incidental acquisition costs (e.g. transaction fees) and other costs (e.g. for setting up an account) in euros; the market price and the trading platform or web-based list (e.g. https://www.coinmarketcap.com/de and https://www.coingecko.com/de) from which it was taken, where the acquisition was not made in euros;
• time of disposal, quantity disposed of and type of disposal (sale/swap) and the trading platform used;
• disposal proceeds and disposal costs (e.g. transaction fees) in euros; the market price and the trading platform or web-based list (e.g. https://www.coinmarketcap.com/de and https://www.coingecko.com/de) from which it was taken, where the disposal was not made in euros;
• documents on purchases and swaps of goods and services using crypto assets, to determine the disposal proceeds to be recognized for them (in connection with credit cards, the corresponding credit card statement is regularly sufficient);
• documentation of the order of use chosen (looking at each item individually, average method or FiFo method) for the respective wallet and/or individual crypto assets;
• documentation of reallocations within wallets for the wallet-based application of the average or FiFo method;
• corresponding documentation of other income from mining, forging, (passive) staking, lending and/or participation in airdrops and similar transactions.

Information requested from taxpayers in the individual case on the origin of funds, on wallet balances on reference dates such as 31 December of the assessment period and of the previous year, on wallet addresses used and transaction hash values (in the case of direct trading, among other things through decentralized trading platforms) or account details for the trading platforms used enables the tax authority to check the statements.

Taxpayers whose total positive income from employment, capital assets, renting and leasing or from other income within the meaning of § 22 EStG (surplus income, Überschusseinkünfte) is more than €500,000 (from 1 January 2027: €750,000) in the calendar year have to observe the retention rules of § 147a AO. This means that they have to retain the records and documents on the receipts and deductible expenses (Werbungskosten) underlying the income for six years. Taxpayers may also retain the records and documents on data carriers (§ 147 Abs. 2 AO applies accordingly). If a data processing system or special software is used to fulfil the retention duties, data access to these systems under § 147 Abs. 6 in conjunction with § 147a Abs. 1 Satz 5 AO can be demanded in a tax audit (§ 193 Abs. 1 AO).

This letter is to be applied to all open cases from the time of its publication in the Federal Tax Gazette (Bundessteuerblatt) Part I. No objection will be raised, for the assessment periods up to and including 2024, to price determinations made under the rules in paragraphs 43 and 58, and in the paragraphs referring to them, of the BMF letter in the version of 10 May 2022, as they applied until the publication of the present BMF letter in the Federal Tax Gazette Part I, or to records outside the scope of the GoBD that deviate from paragraphs 87 ff.