Coins & Tokens in the Crypto Space: An Overview
Cryptocurrencies have long since developed from purely digital means of payment into a versatile technological infrastructure. They enable new forms of property, governance, financing and digital identity. In this article, we shed light on what exactly coins and tokens are, how they are created, what types there are - and what tax issues they raise in Germany.
Crypto assets from a German regulatory perspective (BaFin)
The regulation of transactions in connection with crypto assets is a broad field in which a wide variety of legal sources must be taken into account, which are almost impossible for the layperson to understand. This not only involves purely German regulations (Banking Act, Crypto Custody Act, Payment Services Supervision Act, Asset Investment Act, Money Laundering Act, etc.), but European regulations such as MiCAR (Markets in Crypto-Assets) and the TFR (Transfer of Funds Regulation) must also be taken into account.
The regulatory classification of the tokens determines
- whether and according to which rules the crypto assets may be distributed, in particular whether this activity requires a license or prospectus, and
- whether commercial services in connection with the crypto asset require a license.
The specific design and function of the crypto asset is decisive for the regulatory classification. In this respect, crypto assets must be differentiated as follows:
Security tokens:
These crypto assets represent shares in companies or assets and are subject to securities supervision.
Stable coins and other crypto assets according to MiCAR:
Stablecoins are stable in value by reference to another value and are regulated and defined alongside other crypto assets by Regulation (EU) 2023/1114 on markets in crypto assets (Markets in Crypto-Assets Regulation - MiCAR).
Asset-referenced tokens (ART):
These are stablecoins that are not e-money tokens.
Electronic money tokens (EMT):
These are crypto assets that aim to maintain a stable value by being pegged to the value of a recognized fiat currency as legal tender.
Other crypto assets:
All other crypto assets that do not fall into the EMT or ART categories are so-called other crypto assets.
E-money:
Other crypto assets that are not EMT and that are issued against payment of a sum of money in order to trigger payment transactions can be e-money, which is regulated by the Payment Services Supervision Act.
If a token has the characteristics of the following tokens, these characteristics are merely indications for the regulatory assessment.
Utility tokens:
These are other crypto assets that essentially enable the purchase of goods or services. Under certain conditions, they are not subject to licensing or prospectus requirements.
NFTs (Non-Fungible Tokens):
NFTs are cryptographic tokens which, as the name implies, are not fungible with each other due to their technical properties, i.e. they are not interchangeable. These tokens therefore mostly represent unique digital objects, such as works of art or collector's items. As they are not exchangeable, they cannot be classified as securities. However, they can be structured as a stablecoin or other crypto asset.
Governance tokens:
These tokens allow users to participate in the decisions of a decentralized organization. The tokens could therefore be structured as a security and be subject to securities supervision like a security token.
Currency coins/tokens
Currency coins or tokens are primarily used as a means of payment. If they are on their own blockchain as a native currency, they are generally referred to as coins. If they are set up on other blockchains, they are generally referred to as tokens. These tokens can be classified as an EMR or as e-money, among other things.
Hybrid tokens:
Hybrid tokens combine several functions, e.g. access to services, payment functions and governance rights. The above statements therefore apply to these accordingly.
Practical relevance and recommendation
The regulatory classification of crypto assets is relevant for issuers and crypto asset service providers, as it determines whether the crypto asset may be distributed without a permit and/or prospectus and whether the crypto asset service is subject to licensing. Violations of supervisory law can lead to severe penalties. Anyone acting without the necessary BaFin license risks a prison sentence of up to five years or a fine. Private investors may be involved in this offense. To rule this out, they should ensure that their contractual partner is a company regulated in Germany. Whether this is the case can be found in the company's legal notice or in the BaFin's online company database.
Crypto assets from a market perspective
The general market, new projects, literature and marketing platforms have a much more flexible approach to the terminology used in the crypto asset sector. An attempt is therefore made here to explain the many different terms in more detail. At the same time, there are sometimes definition errors even in the standard market terms (e.g. stablecoins are often actually stabletokens).
Coins - the native blockchain currencies (layer 1)
Coins exist on their own blockchain and often serve as the main currency of a network. They are an elementary component of the blockchain infrastructure and are generated by consensus mechanisms. These mechanisms ensure the security and decentralization (sometimes more, sometimes less) of the network while generating new coins. Layer 1 refers to the main blockchain itself - the basic protocol on which the entire network is based. It handles consensus building, transaction processing and security directly on the chain. There are already very different designs here.
Proof of Work (PoW)
Example: Bitcoin (BTC)
In the PoW process, so-called miners solve complex cryptographic tasks to verify transactions. They receive new coins as a reward. This mechanism is particularly secure, but also very energy-intensive. Bitcoin was the first cryptocurrency to use this process, making it a prime example.
Proof of Stake (PoS)
Example: Ethereum (ETH)
In the PoS process, validators are selected based on the coins they use (“stake”). The higher the stake, the more likely the selection. The financial authority refers to this as forging. PoS is considered to be significantly more energy-efficient and sustainable. With Ethereum 2.0, this process became the new basis for one of the largest networks.
Masternodes (PoW/PoS/PoService)
Example: Ethereum (DASH)
Masternodes are special nodes in a blockchain network that take on additional tasks beyond the mere validation of transactions. They are part of a proof-of-service or extended proof-of-stake system and form the backbone for many services such as instant transactions, privacy or governance. The masternode requires a certain amount of coins as collateral. It performs special functions, such as InstantSend/PrivateSend, hosting of decentralized services or storage. Masternodes are not a separate consensus mechanism, but an extension of existing systems.
Delegated Proof of Stake (DPoS)
Example: EOS
Here, coin holders choose representatives who then validate transactions. This increases the speed and scalability of the network, but reduces decentralization. DPoS is a kind of “delegate democracy” in the blockchain context.
Proof of Authority (PoA)
Example: VeChain (VET)
In this model, only authorized participants validate transactions. These participants are often companies or trustworthy institutions. PoA is particularly suitable for business solutions where efficiency and reliability are more important than complete decentralization.
Proof of History (PoH)
Example: Solana (SOL)
PoH is based on the idea of organizing transactions chronologically through a verified time series. In combination with PoS, a highly scalable network is created. Solana thus achieves very fast transaction times at low costs.
Here is a current list (as of 2025) of the 20 best-known blockchains with their native coins/tokens and the consensus mechanism used:
| No. | Blockchain | Native Coin | Consensus mechanism |
|---|---|---|---|
| 1 | Bitcoin | BTC | Proof of Work (PoW – SHA-256) |
| 2 | Ethereum | ETH | Proof of Stake (PoS – Ethereum 2.0) |
| 3 | BNB Chain | BNB | Proof of Staked Authority (PoSA) |
| 4 | Solana | SOL | Proof of History (PoH) + PoS |
| 5 | Cardano | ADA | Ouroboros (PoS) |
| 6 | XRP Ledger | XRP | Federated Consensus |
| 7 | Avalanche | AVAX | Avalanche Consensus (Snowman, DAG-based) |
| 8 | Polkadot | DOT | Nominated Proof of Stake (NPoS) |
| 9 | Dogecoin | DOGE | Proof of Work (Merged Mining with LTC) |
| 10 | Litecoin | LTC | Proof of Work (Scrypt) |
| 11 | Tron | TRX | Delegated Proof of Stake (DPoS) |
| 12 | Cosmos | ATOM | Tendermint BFT (PoS) |
| 13 | Algorand | ALGO | Pure Proof of Stake (PPoS) |
| 14 | Near Protocol | NEAR | Nightshade (Sharded PoS) |
| 15 | Tezos | XTZ | Liquid Proof of Stake (LPoS) |
| 16 | Internet Computer (ICP) | ICP | Chain Key Technology (custom PoS-like) |
| 17 | Hedera | HBAR | Hashgraph (Asynchronous BFT) |
| 18 | VeChain | VET | Proof of Authority (PoA 2.0) |
| 19 | EOS | EOS | Delegated Proof of Stake (DPoS) |
| 20 | Stacks | STX | Proof of Transfer (PoX - with Bitcoin anchoring) |
Notes:
- Ethereum switched completely to PoS (“The Merge”) in 2022.
- BNB Chain uses a mixture of PoS and PoA - hence PoSA.
- Some chains such as Avalanche, Hedera or ICP use their own, partly proprietary consensus mechanisms.
- Stacks (STX) is a special case: it is based on Bitcoin but has its own smart contract logic and a specific consensus (PoX).
Tokens - outside of the crypto space
General definition
A token is a carrier medium in the broadest sense - it represents something else, such as a value, a right or an authorization. Examples in the physical world are casino chips or admission tickets. In the digital world, tokens are known as TANs in online banking or API access authorizations. Examples before the crypto era:
- TAN generators: Generate one-time valid tokens for transaction release
- Software access: Tokens control access to protected digital areas
- Casino chips: Represent the equivalent of real money
Is a credit card a token?
No, but modern payment systems such as Apple Pay or Google Pay use “tokenization”. The real card number is replaced by a temporary token to make the transaction more secure.
Tokens - within the crypto space (usually layer 2)
Tokens in the crypto world are created on existing blockchains (i.e. where a coin already exists = “layer 1”), usually in so-called “layer 2” and fulfill a variety of functions - from access to platforms and governance to the representation of real assets.
Layer 2 are networks or protocols that are built on top of a layer 1 blockchain to improve scale, speed and cost - without compromising the security or decentralization of the main chain. Typical features of layer 2 applications include processing of large transaction volumes off the main chain, bundling of transactions and subsequent anchoring on layer 1, reduced fees, higher speed, processing of transactions on layer 2, but finalization on layer 1. Accordingly, there is a wide variety of layer 2 applications that can serve very different purposes. Not only tokens but also other applications are executed on layer 2.
An overview may bring some clarity to the structure here:
| Layer 1 | Layer 2 | Scaling type | Layer 2 Token | Note |
|---|---|---|---|---|
| Ethereum | Arbitrum One | Optimistic Rollup | ARB | Governance & fee control |
| StarkNet | ZK-Rollup (STARKs) | STRK | StarkWare's L2, live since 2024 | |
| zkSync Era | ZK-Rollup (SNARKs) | ZK | EVM-compatible ZK solution | |
| Bitcoin | Lightning Network | State Channels | no own token | BTC-native, remains included as desired |
| Liquid Network | Sidechain | L-BTC | Bitcoin-Pegged Token | |
| Rootstock (RSK) | Smart Contract Layer | RBTC | 1:1 against BTC, for smart contracts | |
| Polygon PoS |
Polygon zkEVM | ZK-Rollup | MATIC | Token for governance & fees |
| Nightfall | Hybrid ZK/Optimistic | MATIC (used) | Focus on enterprise privacy | |
| Hermez (Polygon) | ZK-Rollup (former Hermez) | HEZ → MATIC (migrated) | Hermez merged into zkEVM | |
| BNB Chain | opBNB | Optimistic Rollup | BNB | Rollup on OP stack with BNB as gas |
| zkBNB | ZK-Rollup | BNB | Focus on NFT & DeFi | |
| MVB L2 Projects | Diverse | e.g. Celer (CELR) | Participation in MVB Accelerator | |
| Arbitrum | GMX (on Arbitrum) | Layer-2-native DApp | GMX | DeFi platform, uses Arbitrum as L2 |
| TreasureDAO | Gaming/Metaverse Hub | MAGIC | Ecosystem on Arbitrum | |
| Dopex | Option trading | DPX | arbitrum-based derivatives trading | |
| Solana | (filtered: no real layer 2 with token) | – | - | Solana is high-throughput L1, no typical L2 with tokens |
| Avalanche | Beam (Subnet) | App-Chain | BEAM | Gaming focus, independent token |
| Dexalot Subnet | Subnet DEX | ALOT | Limit order DEX in the subnet | |
| Shrapnel | Game Subnet | SHRAP | FPS game with own token |
NFTs (Non-Fungible Tokens)
Example: Bored Ape Yacht Club
NFTs are also based on distributed ledger technologies (such as blockchain) and represent a unique certificate of ownership for a digital or physical asset. They contain metadata that provides information about the underlying asset, such as name, description and, if applicable, a URL. Due to their uniqueness, they are non-fungible.
They are ideal for art, digital collectibles or in-game items and play a major role on the web3. NFTs can be considered digital proofs of ownership, similar to traditional property titles, be it for a digital image, a physical painting or any other good. When an NFT confers the right to receive a specific good or service upon purchase (e.g. by redeeming or “burning” the token), it has a voucher function. Transactions that include both the NFT and the associated asset could be a combined benefit.
Here we have a separate page on the taxation to NFTs.
LP tokens (liquidity provider tokens)
Example: Uniswap LP Token
Liquidity pools are a central element of decentralized exchanges (DEXs) and enable the automated trading of cryptocurrencies without a central intermediary or order book. A liquidity pool is a smart contract that contains two or more cryptocurrencies - e.g. ETH and USDC - and makes them available as a trading pair. Users can deposit their tokens into the pool and receive so-called LP tokens (liquidity provider tokens) in return, which represent their share of the pool. These tokens usually only act as a receipt for liquidity contributed to a pool. They are usually not tradable themselves and do not have their own ticker to represent the market value.
In rarer cases, they can also be traded themselves or used as collateral. They are also frequently used in yield farming. The number of LP tokens remains the same for the duration of the participation in the pool.
Wrapped tokens
Example: Wrapped Bitcoin (WBTC)
A wrapped token is a tokenized version of a coin on a different blockchain. This enables interoperability, e.g. the use of Bitcoin (layer 1) as WBTC (layer 2) in Ethereum-based DeFi protocols.
Bridge tokens
Example: Multichain token
These tokens enable the transfer of assets across different blockchains. They often act as an interim solution in interoperability ecosystems. They solve the problem that blockchains cannot communicate with each other natively because each blockchain has its own set of rules, its own token standard and its own consensus system. The technical process usually consists of “lock & mint” or “burn & release”, depending on the type of bridge:
Lock & Mint (most common mechanism)
- The original token (e.g. BTC) is frozen (“locked”) in a smart contract or with a trusted intermediary on the source blockchain.
- At the same time, an equivalent token (e.g. wrapped BTC, WBTC for short) is “mined” (recreated) on the target blockchain.
- This wrapped token is tied to the original 1:1, but can be used on the target blockchain (e.g. Ethereum).
Burn & release (for reverse transfer)
- When the bridge token is returned, the wrapped token is “burned”.
- In return, the originally locked token is released on the original blockchain and sent back.
Tokenized staking/liquid staking
Tokenized staking - often referred to as liquid staking - is an innovative solution in the blockchain and DeFi sector that makes it possible to participate in staking processes without sacrificing the liquidity of the staked assets. Examples of this are tokens such as stETH (Lido) or rETH (Rocket Pool). In classic staking, coins (e.g. ETH) are locked in a network to validate transactions and secure the network. Rewards are received in return. Problem: The coins are not available during staking - they cannot be traded or used in any other way. With liquid staking, on the other hand, ETH is staked via a provider such as Lido or Rocket Pool. In return, you receive a representative token. These tokens represent the staked ETH share, plus any accrued rewards. These tokens can be freely traded, lent or used for DeFi applications - even though the ETH is still staked.
Two options make a decisive difference here: in one option, the number of representative tokens remains the same, but the algorithm increases the performance by the staking rewards. In the other variant, the number does not remain the same, but the staking yields are represented by additional quantities and not by the value algorithm.
Stablecoins
Fiat backed stablecoins
Example: USDC
These stablecoins are backed by fiat currencies such as the U.S. dollar. They offer stability in volatile markets and are used as digital cash.
Algorithmic stablecoins
Example: DAI
These coins are not backed by fiat, but overcollateralized by crypto assets. Their value is kept stable by algorithmic mechanisms.
Due to the new regulations, many stablecoins are no longer permitted in the EU. Here is an overview of the best-known stablecoins, their supported blockchains and information on authorization in the European Union (EU) in accordance with MiCAR:
|
/ |
Publisher | Type | Supported blockchains | MiCA approval in the EU |
|---|---|---|---|---|
| USDT (Tether) | Tether Ltd. | fiat backed | i.e. Bitcoin (Omni), Ethereum, TRON, Solana, Avalanche, Algorand, EOS, Liquid Network, Polygon, Tezos, | ❌ not approved |
| USDC (USD Coin) | Circle | fiat backed | i.e. Ethereum, Solana, TRON, Algorand, Stellar, Arbitrum, Optimism, Polygon, Avalanche | ✅ approved |
| DAI | MakerDAO | crypto secured (decentralized) | Ethereum (ERC-20) | ❌ not approved |
| BUSD (Binance USD) | Paxos (for Binance) | fiat backed | Ethereum, BNB Smart Chain | ❌ not approved |
| FDUSD (First Digital USD) | First Digital Trust | fiat backed | Ethereum, BNB Chain, Sui | ❌ not approved |
| TUSD (TrueUSD) | Archblock | fiat backed | Ethereum, BNB Chain | ❌ not approved |
| USDD | TRON DAO Reserve | algorithmic | TRON, Ethereum, BNB Chain, Avalanche, Arbitrum | ❌ not approved |
| EUROe | Membrane Finance | fiat backed (EUR) | Ethereum, Solana | ✅ approved |
| EURD/USDQ | Quantoz Payments | fiat backed (EUR/USD) | Algorand | ✅ approved |
| EURØP | Schuman Financial | fiat backed (EUR) | Ethereum, Solana, Stellar, XRP Ledger | ✅ approved |
| EURCV | Société Générale-FORGE | fiat backed (EUR) | Ethereum, Solana, Stellar, XRP Ledger | ✅ approved |
| EURT (DigiEuro) | DECTA (Ireland) & Next Generation | fiat backed (EUR) | Stellar | ✅ approved |
Tokenized real world assets
In Germany, the tokenization of real world assets (RWAs) is a growing sector that is supported by a clear regulatory framework. The German Federal Financial Supervisory Authority (BaFin) has established guidelines for the issuance and trading of tokenized assets, resulting in an increasing number of approved projects. Such projects can take the form of security tokens, funds or NFTs.
Commodity tokens
Example: PAX Gold (PAXG)
Digital tokens that are backed by physical commodities - usually gold. They combine the advantages of crypto with the stability of tangible assets.
Real estate tokens
Example: RealT
These tokens enable participation in real estate projects. They are often designed as security tokens and open up new forms of investment.
BaFin has approved several projects that tokenize different types of RWAs:
- Tokenized securities: companies such as Bitbond and Cashlink offer platforms for the issuance and management of tokenized securities. These platforms make it possible to represent traditional financial instruments such as bonds and shares in digital form on the blockchain.
- Tokenized real estate: Platforms such as Exporo and Fundament Group enable the tokenization of real estate investments. Investors can acquire shares in real estate projects in the form of tokens, which facilitates access to real estate investments.
- Tokenized funds: BaFin has also approved the tokenization of investment funds. Companies such as Black Manta Capital Partners offer solutions for the digital representation of fund shares, which increases tradability and transparency.
Projects must meet strict requirements in order to receive approval. This applies to transparency, the legal structure as well as KYC and money laundering regulations.
Other specialized types of tokens
Meme token
Examples: Dogecoin (DOGE), Shiba Inu (SHIB)
Meme token (also meme coin) is a term for crypto assets that have become known primarily through internet culture, humor, pop culture, irony or viral trends - usually without intrinsic benefit or technological innovation. The term is derived from “memes”, i.e. cultural internet phenomena that spread quickly. The demand is usually not created by technological value, but by community hype, social media (e.g. Twitter, Reddit) or influencer marketing (e.g. Elon Musk, Trump, Melania).
Governance token
Examples: UNI, MKR
These tokens enable votes on the further development of protocols or DAOs.
Reputation token
Reputation tokens are a special class of tokens that are used in decentralized systems to evaluate trustworthiness, contribution or activity within a network. In contrast to many other tokens, they are often non-transferable (comparable to soulbound tokens) and have no direct financial value, but are used for social or functional recognition. They are used for grading influence, e.g. in voting or access to functions, and are often “earned” through activity, contributions, bug fixes or governance commitment.
Examples:
|
/ |
Description |
|---|---|
| Karma (Gitcoin DAO) | Measures the contribution of users to open source projects - influence on governance |
| SourceCred (Cred) | Evaluates contributions in forums, code repos etc. - reputation in community-based projects |
| Aragon Reputation | For older Aragon DAOs: Influence on governance through activity and voting |
| Coordinape (Epoch Tokens) | Awarded within a DAO team for valuable contributions over a period of time |
| BrightID Score | Decentralized proof of identity through social connections - not a token in the strict sense, but reputation-based |
| Colony Reputation | In the Colony platform - based on work done and successes within a DAO |
| Proof of Humanity (PoH) | Combination of identity & reputation - use in UBI projects or DAO membership |
Access token
Allow access to certain services or platforms - often in decentralized apps.
Soulbound tokens (SBTs)
Non-transferable tokens that represent personal characteristics, achievements or identities.
Soulbound tokens are used to create digital identities, e.g. for CVs, memberships, course participation, certificates or diplomas - comparable to a digital CV or portfolio. At present, these are not yet legally recognized and are therefore not comparable to an electronic ID card.
Charity/impact tokens
Example: KlimaDAO
Tokens with ecological or social objectives. Enable transparent tracking of donations.
Gaming token
Examples: AXS, SAND
They serve as currency, reward system and governance instruments in blockchain-based games.
Tokens in insurance and risk management
Insurance tokens
Insurance tokens are digital tokens used within blockchain-based insurance protocols to represent insurance contracts, coverage units or participation rights in an insurance fund. They are often used as proof of an insurance policy, to participate in governance or to distribute risk collectively. The token represents an active insurance policy - against a smart contract hack, for example. In the event of a claim, a payment is triggered automatically. The systems rely on oracles (e.g. Chainlink) to validate external events (weather data, hacker attacks). Automated policies, e.g. by Nexus Mutual or Etherisc Smart Contracts, ensure fast, transparent regulation.
Examples:
|
/ |
Token | Purpose/Description |
|---|---|---|
| Nexus Mutual | NXM | Governance and capital provision for insurance against smart contract risks |
| Etherisc | No standardized token (protocol-based) | Enables weather and flight delay insurance via automated policies, among others |
| InsurAce | INSUR | Multichain insurance against hacks, depegs, node failures, etc.; tokens for governance and rewards |
| Uno Re | UNO | Decentralized reinsurance (DeFi-native), participation through token holding |
| Bridge Mutual | BMI | DeFi insurance against smart contract and exchange risks, governance through tokens |
Stop-loss tokens
A stop-loss token is a blockchain-based financial instrument that automatically activates a selling or safety mechanism when the price of an asset falls below a predefined threshold. It is an attempt to transfer the stop-loss principle known from traditional finance to DeFi (Decentralized Finance) in a decentralized, automated way.
A stop-loss token is usually a smart contract that
- is linked to the current price of the asset (via oracles such as Chainlink)
- contains a predefined limit (e.g. “Sell token A at price < 1,500 USDC”)
- in case the price falls below the threshold automatically
- sells the token
- swaps for stablecoins or
- triggers another safety measure (e.g. buyback by collateral).
Some models use special tokens (e.g. SLT - stop-loss tokens), which represent a securitized right to automatic sale or redemption in the event of price fluctuations.
Example:
|
/ |
Description |
|---|---|
| Alice buys ETH for USDC 2,000 | She mints a stop-loss token that automatically sells at USDC 1,500. |
| Price drops to USDC 1,490 | Smart contract recognizes the decline in value (via Oracle) and sells ETH. |
| Result | Alice receives stablecoins back without having to bear the loss. |
Tax treatment of tokens in Germany
The BMF letters from 2022, supplemented in 2025, on the taxation of crypto assets in Germany do not provide conclusive clarification on many of the tokens presented here.
For example, NFTs, wrapped and bridge tokens, LP tokens and liquid staking are not mentioned. Questions need to be clarified, such as: Does the use of a wrapped or bridge token actually constitute an exchange and does a new one-year period begin? Does the “packaging” of the staking in a separate token lead to a change in taxation? Is the sale of each NFT to be treated in the same way for tax purposes? When does a commercial enterprise exist? And could VAT issues then also arise?
In our crypto taxation section, we provide an overview of all issues relating to the taxation of crypto assets.
Your advisors for tokens and coins in Germany
We are happy to support you with your crypto project and all questions relating to taxation. We will be happy to advise you on the best course of action. Our contacts for all questions relating to crypto assets and crypto transactions are available to you at any time.
You can reach us by phone (+49 69 76 75 77 80 28) or by e-mail (info@winheller.com).
Do you need support?
Do you have questions about our services or would you like to arrange a personal consultation? We look forward to hearing from you! Please fill in the following information.
Or give us a call: +49 69 76 75 77 80
