Crypto investors looking to convert their digital currencies into fiat money, such as U.S. dollars or euros, and transfer the proceeds to their bank account, face the challenge of providing a proof of origin. This proof is essential to avoid suspicion of money laundering and terrorist financing and is a regulatory requirement for banks and financial service providers in Germany.
Risks associated with cashing out cryptos
The world of cryptocurrencies is already complex enough, and trading cryptocurrencies isn’t the only aspect that carries significant risks. Even when an investor has amassed a fortune through crypto investments, concerns about their assets persist. As long as they haven’t exchanged their digital currencies for a state currency, they can only utilize them within the crypto ecosystem.
However, cashing out cryptocurrencies, which involves transferring large amounts of crypto assets to a regular bank account, carries risks. One of the main issues is the potential suspicion of money laundering. If a bank or financial service provider suspects that the funds come from illegal activities, they are obligated to file a suspicious money laundering report with the Financial Intelligence Unit, i.e., customs. Transfers from crypto exchanges are still viewed with suspicion by most banks and classified as a corresponding risk business.
This can result in the account being blocked and, in the worst-case scenario, criminal proceedings, which can have significant financial and legal repercussions for the investor. In particular, they may not have access to their bank account for weeks or months.
Proof of origin and money laundering prevention
A Proof of origin is necessary to dispel such suspicions. It enables the bank to definitively determine the origin of the funds to ensure that transactions do not contravene anti-money laundering regulations or other laws in Germany.
Ideally, the proof should be provided before the transaction is executed, but at the very least when requested by the bank – although it can often be too late by then because the account has already been blocked.
The requirements for the proof of origin can vary depending on the bank and the individual case. However, they are generally comparable. The key factor is that the transferred funds can be traced back to their origin (“source of funds”). Particularly for intensive investment activities in cryptocurrencies, especially on decentralized exchanges (DEX), this traceability can be very complex.
Multiple bank accounts as an alternative
Crypto investors should always have and maintain multiple bank accounts. If the bank blocks the account when a withdrawal is made despite a proof of origin being available, which will almost never happen in practice, the investor can at least access their alternative bank account for the duration of the block and thus bridge liquidity gaps.
Comprehensive advice on proof of origin
Withdrawing cryptocurrencies is a complex process that cannot be completed without presenting a proof of origin. This proof protects both the investor and the bank from legal risks and is a crucial component in complying with money laundering prevention regulations.
If you have any questions about this or need such a proof of origin, please do not hesitate to contact us. We have already produced numerous such certificates, which are accepted by the banks.
Read more:
Certificate of Origin And Reporting Obligation For Cryptocurrencies in Germany
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