Circle Executive Criticizes Germany’s Proposed 50% Crypto Tax Substitute Assessment

Germany’s Federal Ministry of Finance has drafted a crypto‑tax reform that would apply a 50% substitute assessment basis to crypto assets when taxpayers cannot provide credible documentation of their acquisition costs. Under the proposal, the tax authority would assume the purchase occurred after 31 December 2026 and calculate tax on 50% of the sales proceeds.

Industry reaction

Patrick Hansen, senior director of EU strategy and policy at Circle, said the measure would disproportionately affect everyday investors who lack detailed transaction records. He noted that many users buy crypto in small amounts, sometimes at a loss, and may be unable to present “clean” acquisition data.

Potential impact on investors

Hansen argued that the rule could lead to over‑taxation, especially as Bitcoin’s price is lower than a year ago and many other assets have underperformed. He warned that the implicit assumption of price appreciation is unrealistic for most retail holders.

Legal and liquidity concerns

Dr. David Hötzel, associated partner at Poellath, said the 50% figure is not final but highlighted the liquidity risk it creates for transfers from self‑custody wallets or foreign platforms to German exchanges. He emphasized that reliable documentation will become essential to avoid high provisional deductions.

Broader context

The proposal comes amid broader European discussions on crypto regulation, including the Markets in Crypto‑Assets (MiCA) framework, which Circle has previously commented on.