Germany now has a new tax law that will ban all derivatives trading starting in 2021. "I'm shocked by the malice behind this,” commented researcher Hasu.
Germany will ban crypto derivatives trading on January 1, 2021
According to the German new tax law, there will be a deduction of up to 20,000 euros for individual traders for losses incurred from transactions of crypto derivatives, including futures and options contracts starting January 1, 2021.
This means that investors cannot offset their losses with capital gains. A tax attorney who contributed to the report exemplifies tax calculations in this way:
"The two transactions are a profit of 1 million euros and a loss of 800,000 euros, and not only do we file a tax return for the profit of 200,000 euros, but we also file the loss of 800,000 euros."
In this example, only 20,000 euros out of 800,000 euros can be deducted.
Hasu, a well-known researcher who contributes to the major cryptocurrency options exchange Deribit, explains this new tax law.
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He pointed out that if he were a large trader, his tax payments could far exceed his profits. He also urged traders using FTX, Binance, BitMEX, and Deribit to consult with tax attorneys and other professionals in Germany, saying that "it is virtually equivalent to banning individual derivative transactions in Germany."
In the case of companies, regulations such as threshold values are different.
If you trade larger volumes (e.g. +1m winnings -950k = +50k net) you can wreck yourself with a GIGANTIC tax bill that far exceeds your winnings. (4/6)— Hasu⚡️🤖 (@hasufl) December 19, 2020
FCA banned sales of cryptocurrency-based derivatives
As a reminder, in October, the UK Financial Conduct Authority (FCA) banned the sale of crypto derivatives to retail investors. According to the city watchdog, crypto derivatives are ill-suited for retail consumers due to the harm they pose. However, the ban, which does not apply to crypto trading, will come into effect on January 6, 2021.
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