Borrowing Against Bitcoin Instead of Selling: When German Tax Still Applies

Putting Bitcoin up as collateral for a loan is not a sale. That is exactly why no tax arises at that moment: a private disposal transaction requires you to transfer an asset to a third party for consideration. When you borrow against your coins, the Bitcoin stays attributed to you for tax purposes, the one-year clock keeps running undisturbed, and the loan proceeds are not income. The expensive part sits in one single place, namely when the lender liquidates your collateral. That creates a sale you did not trigger, at a price you did not choose, possibly in the middle of your holding period. This article sets out the position under German law: the Income Tax Act, the Fiscal Code and the current circular of the Federal Ministry of Finance on crypto assets. It also shows where those sources stay silent, because the expensive misunderstandings grow in exactly those gaps. Why pledging Bitcoin as loan collateral is not a sale For tax purposes, crypto assets are other assets within the meaning of section 23(1) sentence 1 number 2 of the German Income Tax Act. The Federal Fiscal Court confirmed this in its ruling of February 14, 2023, case reference IX R 3/22, and the Federal Ministry of ...