While Germany had taken the lead among other European countries by regulating cryptocurrencies as early as 2013 through BaFin, the country is now witnessing a wave of companies leaving and businesses closing. The culprits: overly strict regulations, astronomical licensing costs, and a lack of venture capital.
Regulations that are stifling crypto innovation in Germany
The German Federal Financial Supervisory Authority, known as BaFin, established a clear regulatory framework for crypto activities as early as 2013, classifying Bitcoin as a private unit of account that did not require a license for simple payments. At the time, this attracted investors to the country, particularly thanks to the tax exemption on cryptocurrencies held for more than one year.
But Germany has gradually transformed its once-favorable regulatory environment into an obstacle course for crypto companies. Today, obtaining a license from BaFin costs at least 10,750 euros in fees, with a mandatory initial capital requirement of 125,000 euros. On top of that, annual supervisory fees can reach up to 500,000 euros depending on the complexity of operations, and the registration process can take up to six months.
These requirements have driven several major players out of the market. Binance withdrew its application for a German license in July 2023, citing significant changes in market conditions and regulations. Nuri, formerly Bitwala, went bankrupt in August 2022 after filing for bankruptcy, unable to find investors despite its 500,000 users. The exchange shut down permanently in December 2022.
And that’s not all. On top of that, German authorities shut down 47 crypto platforms in September 2024, accusing them of facilitating money laundering. While some were indeed illegal, among them were sites like Xchange.cash, which had processed millions of transactions since 2012.
An Exodus to More Welcoming Countries
As a result, the figures on innovation in Germany are telling: 26% of German tech startups are considering leaving the country, mainly due to a lack of venture capital. The “Startup Report 2025” study, conducted by Bitkom—the German digital industry association—among 152 startups, reveals that 81% feel that investment funds and business angels have become much more cautious about investing. Even more concerning: only 23%, or fewer than one in four startups, believe there is enough money available in Germany to adequately fund the ecosystem.
For the crypto sector, this percentage could be even higher.
As a result, in recent years, many startups have chosen to set up shop in Estonia or Malta, where European regulations are easier to comply with without additional national laws or regulations on top of them. The United States, where President Donald Trump has shown increasing support for innovation and, in particular, cryptocurrencies, is also a good alternative.
