Buying bitcoin, the first steps in four decisions

This piece describes buying bitcoin in Germany. The identification duties, the licence requirements and the tax rules named here are German rules, and readers in other countries face different ones. Only MiCA, the EU regulation on markets in crypto-assets, applies across the whole European Union. The first purchase consists of four decisions: from whom, with which identification procedure, in which order type, and where the units sit afterwards. Three of them cost money, one costs nerves. The order below follows the way it actually runs in Germany, with the rules that stand behind it.

Step 1: choose a provider with a licence

Since 30 December 2024, Regulation (EU) 2023/1114 of 31 May 2023, MiCA for short, has applied across the entire EU. Its article 59 forbids anyone to offer crypto-asset services in the Union without being authorised under article 63, or without belonging to the bodies that article 60 permits to do so, among them credit institutions, investment firms and electronic money institutions. For asset referenced tokens and e-money tokens, that is titles III and IV, the regulation has applied since 30 June 2024 already.

Existing providers were given time. Article 143 paragraph 3 allows them to carry on until 1 July 2026, or until their application for authorisation under article 63 is decided, whichever comes first; at the same time it expressly leaves member states the option of shortening that period. Germany has done so: under section 50 paragraph 2 number 3 of the Kryptomärkteaufsichtsgesetz, the German Crypto Markets Supervision Act, the licence deemed to continue expired at the end of 31 December 2025 at the latest. Anyone providing crypto-asset services in Germany today therefore needs an authorisation. Whether a provider holds one is shown in the company database of BaFin, the German financial supervisory authority; check the full company name there, not the brand.

Article 66 also obliges authorised providers to act honestly and in the best interests of their clients, to mark marketing communications as such, and to warn about the risks of transactions in crypto-assets.

Step 2: identification under the German Anti-Money Laundering Act

There is no way round the identity document. Section 10 paragraph 1 of the Geldwäschegesetz, the German Anti-Money Laundering Act, lists 5 general due diligence duties, among them identifying the contracting party, establishing any beneficial owner and monitoring the business relationship on an ongoing basis. For transactions outside a business relationship the duty applies to crypto-assets from 1,000 euro upwards, while for other transactions it only starts at 15,000 euro.

The timing is set out in section 11 paragraph 1: identification takes place before the business relationship is entered into, or before the transaction is carried out. Under section 11 paragraph 4, what is collected from natural persons is first name and surname, place of birth, date of birth, nationality and address. Have your identity card or passport ready and expect a video or postal procedure to take anywhere from a few minutes to a few days.

Step 3: pay in and choose the order type

Money usually reaches the account at the provider by bank transfer, more rarely by card. After that there are typically three order types to choose from. With an order at the market price, it is executed straight away at the next best price; you know it will go through, but not exactly at what price. With a limit order you set a maximum price; you know the price, but not whether and when it will be executed. A savings plan buys at fixed intervals for a fixed amount, usually in monthly or weekly instalments.

A whole bitcoin is not needed for any of this. 1 BTC consists of 100,000,000 smallest units, and from what we see providers usually set minimum amounts somewhere between 1 and 25 euro; that is an editorial observation, not a survey. Watch two settings: whether you are trading in the order book or in a simplified mode, and whether the price shown is the trading price or already includes a mark-up.

Amounts can be worked through beforehand. How many of the smallest units a euro amount buys is shown by the satoshi to euro converter; how several purchases work out to an average price is shown by the average cost calculator. Whether regular instalments suit you is a separate question, dealt with in the piece on the crypto savings plan.

What the purchase costs

The price on the screen is rarely the price you pay. Four items come together: the stated fee, the spread between the buying and selling price, possible mark-ups in the simplified buying mode, and the costs of paying in and out. The ranges below are editorial observations from publicly available price lists, not a sample we have surveyed. Article 66 and article 75 paragraph 1 letter f of MiCA oblige authorised providers to disclose fees, costs and charges, so you can look up every line with your own provider.

Step 4: decide on custody

After the purchase the units sit with the provider at first. For that, article 75 of MiCA requires a contract that describes, among other things, the custody policy, the authentication system, the security systems and the fees, and it obliges the provider to keep a register of positions per client. There is no statutory deposit protection of the kind that covers bank balances.

The alternative is custody of your own. Then you hold the secret key yourself, usually backed up through a recovery phrase, the seed phrase, of 12 or 24 words. With that the provider risk disappears, and the risk of your own mistakes takes its place: a lost note, a photographed phrase, a backup that does not work. Which type suits your amount and the way you use it is settled by the wallet type finder.

Anyone transferring units should keep the first transfer small. Send a fraction, wait for the confirmations, check that it arrived, and only then send the rest. A receiving address typed in wrongly cannot be recovered, and there is no office that cancels the transaction. Reckon on 1 to 6 confirmations before the recipient treats the incoming amount as final, so depending on the provider on average between 10 and 60 minutes; the block time is random, and in a single case it takes longer.

What to settle before the first purchase

First, tax. In Germany bitcoin falls under section 23 paragraph 1 sentence 1 number 2 of the Einkommensteuergesetz, the German Income Tax Act: if no more than one year lies between acquisition and disposal, the gain is taxable, and after that it is not. Under section 23 paragraph 3 sentence 5 of the same act, gains stay tax free if the total gain from all private disposal transactions in the calendar year comes to less than 1,000 euro; until 2023 this exemption limit stood at 600 euro. An exemption limit is not an allowance: 1 euro above it makes the full amount taxable. The details are set out in the piece on crypto tax and the holding period.

Second, the records. The circular of the German Federal Ministry of Finance of 6 March 2025 recasts the circular of 10 May 2022 and, in section III, governs the duties to cooperate and to keep records for assets held privately. From the first purchase on, save the date, quantity, price, fees and provider, and download transaction statements while you still have access. Anyone using tax software should save the report settings as well, for instance the cost flow method used.

Third, the amount. Only put in money whose complete loss you can bear, and settle beforehand how you get out again: which route leads back to the bank account, how long it takes, what it costs. That question can be answered in five minutes before the purchase, and no longer answered calmly after a fall in the price.

Frequently asked questions

Sources