Germany Cracks Down on Crypto Leverage

A crypto CFD and a purchased coin may appear identical on screen, but they differ significantly in law. With a CFD, you enter into an agreement with a provider on the difference in price, without any actual coins being transferred to your account.

In contrast, a direct purchase involves buying the crypto asset outright, which then belongs to you and can be withdrawn to a wallet of your own choice.

This distinction has far-reaching implications for leverage, tax treatment, custody arrangements, and counterparty risk.

The rules governing CFDs in Germany are strict, with retail clients facing a hard ceiling on leverage at 2:1. This is due to the European MiFIR regulation and BaFin's general administrative act of July 23, 2019.