Germany and Italy Open a New Front in Europe’s Crypto Oversight
Europe's crypto rulebook is moving beyond licensing. Two measures emerging this week in Germany and Italy target what happens after investors and businesses gain access to digital assets: Germany wants to change how profits are taxed, while Italy is telling supervised intermediaries to strengthen sanctions screening around crypto transfers.
Summary:
- Germany plans to move newly acquired crypto into its 25% investment-income tax regime.
- Existing holdings are expected to remain under the current rules if the draft survives unchanged.
- Italy’s central bank wants supervised firms to strengthen screening of crypto transfers involving sanctioned parties.
- Both measures extend oversight beyond MiCA’s core licensing framework into taxation and transaction-level compliance.
The policies are unrelated, but together they show the next phase of European oversight shifting toward the financial plumbing surrounding crypto ownership and movement.
Germany Wants to Remove Crypto’s Tax Advantage
Germany currently offers long-term crypto investors an advantage that conventional stock investors do not receive.
Bitcoin, Ethereum and similar assets held privately can generally be sold tax-free once the investor has held them for more than one year. Selling earlier can make the gain taxable at the individual’s personal income-tax rate, which can be considerably higher than the rate applied to conventional investment income.
The Finance Ministry now wants to replace that distinction for newly acquired assets.
A draft reported by Handelsblatt would bring crypto gains under Germany’s 25% Abgeltungsteuer, putting them closer to stocks and fund investments. Holding the asset for several years would no longer make the eventual gain tax-free.
The Finance Ministry argues that crypto has increasingly become a form of private capital investment and should no longer receive different treatment from other investment income.
For investors, the effect would depend heavily on trading behavior. Active traders currently exposed to higher personal income-tax rates could benefit from a flat rate. Long-term holders would lose the more valuable feature of the existing system: the ability to wait out the taxable holding period entirely.
Older Bitcoin Holdings Would Keep the Old Rules
The proposed transition prevents the change from immediately reaching every German crypto portfolio.
Under the current draft, the new treatment would apply to crypto purchased after December 31, 2026. Assets acquired earlier would remain under the existing framework. The law itself is planned to take effect on January 1, 2027.
That grandfathering provision could create a lasting difference between identical tokens depending on when they were bought.
It also increases the importance of transaction histories. Investors who accumulate Bitcoin across several years may eventually hold units governed by different tax treatments inside the same wallet.
The proposal is still being coordinated within the German government and can change during the legislative process. It should therefore not yet be treated as enacted law.
Exchanges Could Start Collecting the Tax in 2028
Germany is also looking beyond the tax rate itself.
Automatic withholding by crypto service providers is planned from January 2028, giving platforms additional time to build the necessary systems. The Finance Ministry expects the reform to generate about €160 million in additional revenue in 2028, rising toward roughly €350 million annually in subsequent years.
This is where implementation becomes more complicated than taxation of a conventional brokerage portfolio.
Crypto can move from an exchange into self-custody, between private wallets and eventually onto another platform. The exchange handling the sale may therefore lack the original acquisition price required to calculate the gain.
Germany will need rules for transferring or reconstructing that cost basis if automatic withholding is to work reliably.
Italy Is Focusing on Who Sits Behind a Crypto Transfer
Italy’s latest measure addresses a different part of the transaction.
On September 7, Banca d’Italia issued a communication telling supervised intermediaries to ensure their systems can identify relationships and transactions involving individuals and entities subject to European Union or national sanctions.
The guidance specifically covers transfers of funds and crypto-assets.
Rather than creating a new sanctions regime exclusively for cryptocurrency, the central bank is applying existing restrictive measures to digital-asset flows and directing firms toward the European Banking Authority’s EBA/GL/2024/15 guidelines.
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Those guidelines address how payment service providers and crypto-asset service providers should configure controls designed to detect sanctions exposure.
That distinction matters. Italy has not announced a blanket restriction on crypto transfers. The focus is whether regulated intermediaries have sufficiently effective systems to identify prohibited parties before processing transactions.
Wallet Screening Is Harder Than Checking a Customer Name
Sanctions compliance becomes technically different once funds move onchain.
A bank can screen a customer’s identity, beneficiary information and account details against sanctions lists. A crypto transfer can involve wallet addresses whose owners are not immediately visible from the blockchain itself.
Compliance systems may therefore need to combine conventional customer screening with blockchain analytics, wallet attribution and transaction monitoring.
The Italian central bank specifically emphasizes the configuration and calibration of screening systems rather than simply requiring firms to possess them.
That raises practical questions around false positives and indirect exposure.
A wallet can interact with thousands of other addresses. Simply receiving funds that previously passed through a sanctioned address does not necessarily mean the current holder is itself sanctioned. Screening systems therefore need thresholds capable of distinguishing meaningful exposure from incidental blockchain connections.
The consequences of getting that calibration wrong run in both directions: weak controls can allow prohibited transactions through, while overly aggressive screening can block legitimate customers.
Italy’s Move Reflects a Wider Compliance Problem
The country’s financial intelligence unit has already identified crypto as part of a changing money-laundering landscape.
Italy’s UIF received 162,059 suspicious transaction reports in 2025, an increase of 11.5% from the previous year. Its annual report said expanding use of crypto assets, virtual IBANs, virtual cards and non-bank ATMs was making money flows more opaque, alongside a rise in fraud and cybercrime-related reports.
The central bank’s September communication therefore fits into a broader attempt to ensure that regulated crypto activity does not sit outside the sanctions controls already applied to traditional finance.
For crypto service providers, compliance is increasingly moving from onboarding to the transaction itself.
Knowing who opened an account is no longer enough if a platform cannot determine whether the destination of a transfer creates sanctions exposure.
Europe’s Next Crypto Rules Are Moving Into the Back Office
Germany and Italy illustrate two different consequences of crypto becoming integrated into regulated finance.
Germany is asking how investment gains should be classified and collected once digital assets behave increasingly like mainstream portfolio holdings. Italy is asking whether financial intermediaries can apply sanctions controls effectively when value moves through blockchain addresses rather than conventional bank accounts.
Neither policy is primarily about whether Europeans are allowed to own or trade crypto.
The pressure is moving into tax records, cost basis, wallet screening and transaction monitoring, areas that receive less attention than token listings or licensing but determine how easily crypto can operate alongside the existing financial system.
For German investors, the unresolved details around grandfathering and cost-basis reporting will shape the practical impact of the proposed tax overhaul. For Italian crypto firms, the immediate test is operational: whether sanctions screening can become precise enough to identify prohibited transfers without treating every indirect onchain connection as equivalent risk.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Alexander Zdravkov
Reporter at CoinsPress
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 10,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
