Demand for new ways of value storage is often connected to economic happenings and times of crisis. In recent years, many people have been turning to cryptocurrency to counter hyperinflation and thus, loss of currency value. Nevertheless, global players with strong economies are still often seen at the forefront of cryptocurrency adoption.

What benefits can cryptocurrency provide to economically strong countries that aren’t necessarily in immediate times of crisis, and how can digital asset adoption offer real, long-lasting change that improves the lives of citizens worldwide?

From Digitalisation Late-Comer to Blockchain Nation: a Look at Germany

For many years, experts have warned that Germany’s public sector is lagging behind when it comes to technological innovation. Many have wondered why Europe’s richest country and global superpower simply can’t modernise and digitise the way other countries have done.

During the COVID-19 pandemic, digital shortcomings became more obvious, and newspaper headlines titled ‘Europe’s largest economy, Germany, is falling behind in technology — and the country’s leaders know it’ (dw.com) seemed to show up more frequently. To many, Germany simply ‘overslept’ digitalisation.

It seems as though what Germany missed out on with the early adoption of digital technology they now want to make up for with cryptocurrency regulations. In 2013, Germany became the first country in the world to establish a clear set of rules applicable to cryptocurrencies, recognising that Bitcoins are units of value and could be classed as a financial instrument. Since then, German legislators have been taking a leading role in the legal challenges of cryptocurrencies.

The Bitcoin hype caught on early among German visionaries who imagined a digital technology that allowed payments independent of borders and government money. In Berlin, Bitcoin Bar Room 77 opened its doors in 2011 with the focus of creating a meeting point for crypto enthusiasts and a place where Bitcoin can be used as a form of payment.

It remained popular among crypto-visionaries and journalists globally until its closure in 2020. Owner Jörg Platzer saw the end of Room 77 not as a failure but as a success. He states: “Bitcoin is now big enough to survive without a Berlin Rock’n’Roll Bar supporting it. Mission achieved” (heise.de).

In 2019, Germany officially adopted a ‘blockchain strategy’ in order to further establish itself as a blockchain nation. German Finance Minister Olaf Scholz stated: “We want to be at the forefront of innovation, and we want to reinforce Germany’s position as a leading technology hub. As part of the internet of the future, blockchain technology can play a key role in our efforts. In order to do that, it is essential to protect consumers and state sovereignty(bundesfinanzministerium.de).

This strategy has been praised by many, stating that adopting blockchain technology is an important step towards enabling new independent business models and ecosystems to ultimately shape a more secure and trustworthy future.

Global Leaders: Cryptocurrency Adoption in Strong Economies

Whilst emerging markets are often driven by necessity and the need for change, there is a multitude of reasons as to why cryptocurrencies are so popular in markets with strong economies. Adoption in Germany is primarily driven by a young, tech-savvy population looking for high-yielding forms of investments.

Crypto-friendly laws and easy access to cryptocurrency exchanges and brokers are widespread. Many merchants accept digital currencies as a medium of payment, and well-known international companies such as Paypal and Tesla, which are popular in Germany as well, are sold on digital assets.

As with any type of market though, fear of missing out also plays a huge role and partly explains as to why many new investors have swiftly entered the crypto space during the 2021 bull market. The driving factors in economically well-off countries are thus often easy access, fear of missing out, high-yielding investments and community.

Factors that drive emerging market adoption, such as political instability, hyperinflation, government distrust and a new digital infrastructure that banks the unbanked and solves problems in regards to financial inclusion, are not at the forefront of adoption in globally leading countries.

The cryptocurrency community is expanding fast in Germany. Many young people have found community through digital currencies and whilst this isn’t the only factor driving adoption in economically strong countries, the power of community is an aspect not to be neglected. Asides from the community and financial opportunity, cryptocurrency technology does provide real value to global players too.

Some of the main benefits include low transfer fees, crypto existing independently of a nation or a border, potential for profit when trading and the blockchain offering a new and innovative information-storing technology. Many believe that cryptocurrency should be an integral part of the German digitalisation journey going forward to secure the Central European country’s economic leadership globally.

Crypto Adoption in Germany Today

Central, Northern & Western Europe remains the world’s largest crypto economy in 2022, mainly due to DeFi, NFTs and growing regulatory clarity. Western Europe alone contains six of the 40 highest grassroots adopters of cryptocurrency: The United Kingdom (17), Germany (21), France (32), Spain (34), Portugal (38), and the Netherlands (39).

Whilst on-chain activity in CNWE grew at a rate of between 1–30%, Germany stood out with a massive increase of 47%. This growth was most likely influenced by two main decisions. (1) a 0% long-term capital gains tax and (2) allowing different types of asset managers to invest in cryptocurrencies. Both these decisions heavily impacted both retail and institutional adoption.

Germany ranks first in crypto transaction volume in top ten CNWE countries (Chainalysis: Geography Of Cryptocurrency Report)

Germany is amongst the few economies that legally recognise licensed cryptocurrency exchanges as well as wallet providers as part of the financial services industry. As mentioned above, the country’s proactive approach to cryptocurrencies has been reaffirmed since the 2019 adoption of a national blockchain strategy. The goal: to make the country a blockchain and crypto hub as well as using the technology’s potential for advancing digital transformation, including the development of blockchain, Web3, and the metaverse.

Bitkom CEO Achim Berg states: “With its blockchain strategy, the German government has taken a leading role in the whole of Europe” (euractiv.com). Crypto exchange comparison site Coincub recently named Germany as the world’s most crypto-friendly country, with Singapore and the United States rounding up the top three.

On a global scale, Germany still falls behind many emerging markets, such as Vietnam or India, in terms of cryptocurrency adoption. The amount of other traditional investment options being widely available, along with lingering mistrust in cryptocurrency and the lack of an immediate need for the technology leads to a less rapidly, yet still steadily growing cryptocurrency space. Further regulation and legislation is needed to foster and support mainstream adoption.

Nevertheless, it is exciting to see Germany’s blockchain strategy and its interest in adapting cryptocurrency and making the ecosystem safer and easier to access. There is no doubt that early adoption and regulations will bring benefits to the German economy and we are excited to see how further education and access will shape the future of blockchain technology and cryptocurrency in Germany.

~By Tina~