Crypto Funds in Germany: Supervision, Taxation, Advice
Cryptocurrencies have developed into a popular asset class that is also becoming increasingly interesting for institutional investors in Germany. Institutional investors such as pension funds, insurance companies and large asset managers are increasingly investing in crypto assets via crypto funds. These professional investors often manage billions and require secure, regulated forms of investment. A crypto fund offers investors the opportunity to invest in various digital currencies without having to manage them directly themselves.
What is a crypto fund?
A crypto fund is an investment that specializes in investments in cryptocurrencies and blockchain-based assets. These funds are managed by professional fund managers who actively manage the portfolio and make investment decisions in the interests of the investors. Unlike direct investments in individual cryptocurrencies, investors benefit from a broad diversification of the investment risk.
Regulatory classification of crypto funds in Germany
1. Regulation by BaFin
- Crypto assets are considered financial instruments in Germany in accordance with Section 1 (11) of the German Banking Act (KWG). Their management or custody requires a license in accordance with the KWG.
- Crypto funds are therefore monitored by the German Federal Financial Supervisory Authority (BaFin). BaFin regulates both the providers of crypto funds and the custody and management of crypto assets in the fund.
2. KryptoFAV (Crypto Fund Share Ordinance)
- The Crypto Fund Share Ordinance (KryptoFAV), which came into force on June 18, 2022, extends the German Electronic Securities Act (eWpG). One of the key aspects of the eWpG was that it only applied to bearer bonds. The regulation also makes it possible to issue fund shares as so-called crypto fund shares, which can be kept in a decentralized crypto securities register (e.g. on a blockchain).
- These fund shares are electronic and offer an alternative to traditional securitized shares. However, they are only available for special assets (investment funds in contractual form).
3. Investment law requirements
- Special funds may invest directly in crypto assets in accordance with Section 284 of the German Investment Code (KAGB), provided that certain organizational requirements are met.
- Mutual funds, on the other hand, can only invest indirectly via financial instruments that track the performance of crypto assets.
4. European regulation through MiCA
- The EU regulation “Markets in Crypto-Assets” (MiCA), in force since June 2024, creates uniform rules for crypto assets and also affects crypto funds. It requires authorization for services related to crypto assets and enables EU-wide passporting for authorized providers.
What advantages does a crypto fund offer investors?
Professional management by experienced fund managers is one of the main advantages of crypto funds. They not only select the cryptocurrencies but also ensure the secure custody of the digital assets. Investors can also benefit from the expertise of the managers, who continuously monitor and analyze the market. In addition, investors do not have to manage their own wallet and can therefore trade via traditional exchanges. The use of cryptographic security procedures such as public key and private key can also be dispensed with.
Taxation of crypto funds
Special tax regulations must be observed when investing in crypto funds in Germany. Profits from the sale of fund shares are generally subject to final withholding tax. However, the tax treatment may differ depending on the structure of the fund and the holding period. This depends on the exact structure of the individual case. We would be happy to examine your specific situation.
Our advisory services for crypto funds
Our team of specialist lawyers and tax advisors will support you with all legal and tax issues relating to investments in crypto funds. From the review of fund documentation to the tax-optimized structuring of your investment, we are at your side. We support you with:
- Obtaining a license as a capital management company
- Implementing and maintaining proper business operations
- Structuring the fund terms and conditions
- Issues relating to distribution law
- Clarification of correct taxation at investor level
Your attorney for crypto funds in Germany
We represent you in dealing with the supervisory authorities and put your legal relationships with your clients on a secure legal footing. Our tax department also assists you with all tax issues relating to crypto funds.
The easiest way to contact our advisors for crypto funds is by e-mail (info@winheller.com) or by phone (+49 69 76 75 77 85 28).
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