Two Routes Out of an Exchange Insolvency: Coins Back, or a Dividend in Euros

If a crypto exchange becomes insolvent and you later get something back, what decides the crypto tax is not the size of the payment but its form. If the same coins return into your control, nothing has happened for tax purposes: acquisition date and acquisition cost run on unchanged, and a holding period that expired long ago stays expired. If money arrives instead on a filed insolvency claim, the event is an entirely different one, and the tax authorities have not expressly regulated it to this day.

That difference is the whole article. It concerns many German investors right now, because several large proceedings are stuck in the wind-up phase and a deadline at Mt. Gox expires on October 31, 2026. Both routes are set out below in detail, along with the evidence question on which most cases turn in practice.

Two Routes Out of the Proceedings: Segregation in Coins or an Insolvency Claim in Euros

When insolvency proceedings open, the assets split into two pots. Everything belonging to the debtor forms the insolvency estate and is distributed among the creditors. What belongs to a third party, even though it sits with the debtor, is not part of it. For that case the German Insolvency Code provides for segregation: under Section 47 InsO, a person holding a right in an object that does not belong to the estate may demand its surrender. They are then not an insolvency creditor but an owner reclaiming their property.

Whether that route is open to you depends on the custody arrangement. If your coins sat in a holding that was separated from the exchange's own assets and attributed to you, much speaks for segregation. If they were mingled in the exchange's pooled wallets with the holdings of every other customer, the result is as a rule a simple insolvency claim under Section 38 InsO: a monetary claim valued as at the opening date which brings only a dividend in the end. We have written up the legal side of that distinction in a separate piece on segregation in an exchange insolvency, and how a filing works in practice is shown by the zondacrypto case.

Why This Classification Comes Before the Tax Question

The tax treatment follows the classification under civil law, not the other way around. Anyone who does not know whether they will get coins or a monetary claim back cannot determine the tax consequence. In case of doubt, the answer sits in the insolvency administrator's letter and in the schedule of claims: if a claim is listed there in euros or dollars, you are an insolvency creditor.

Surrender of the Same Coins Is Not a Disposal Within the Meaning of Section 23 EStG

Under settled case law, crypto-assets are “other assets” within the meaning of Section 23(1) sentence 1 no. 2 of the German Income Tax Act (EStG). The Federal Fiscal Court decided this in its judgment of February 14, 2023, and the Federal Ministry of Finance circular of March 6, 2025 carries that classification forward. Gains from a sale of privately held assets are therefore taxable only if no more than one year lies between acquisition and disposal.

The two terms are decisive. An acquisition is the acquisition from third parties for consideration. A disposal is, as its mirror image, the transfer of the acquired asset to third parties for consideration. Both presuppose consideration and a change of legal owner. When an insolvency administrator surrenders your own coins to you, they are fulfilling a claim for surrender. You pay no consideration for it, and ownership does not change hands but merely becomes accessible again. On that definition there is no private disposal, and the return itself triggers no tax.

One qualification belongs here: the Ministry circular does not deal with the insolvency case separately at this point. The classification follows from the general definitions set out in it, and not from any statement by the tax authorities on insolvency proceedings.

On Surrender, the Holding Period From the Year of Acquisition Runs On

The one-year periods of Section 23 EStG begin anew after every exchange of assets. A surrender is not an exchange, so nothing begins anew. For you that usually means good news: whoever bought in 2021, lost access in 2022 and receives the same coins back in 2026 holds assets whose holding period expired years ago. A sale after that is tax-free for privately held assets, regardless of how far the price has risen in the meantime.

Conversely, the same mechanism also works against you if the acquisition fell shortly before the collapse and the surrender came quickly. Then the period may still be running. For the total gain of a calendar year, the exemption threshold of Section 23(3) sentence 5 EStG remains: if the sum of all private disposals stays below €1,000, it stays tax-free. Up to the 2023 assessment period that threshold stood at €600. This threshold applies to all private disposals of one year taken together, not per coin.

Mt. Gox: The Extended Repayment Deadline Ends on October 31, 2026

The most concrete date for those affected in Germany comes from Japan. By a notice from the Rehabilitation Trustee of October 27, 2025, the trustee of the Mt. Gox proceedings moved the deadline for the base repayment, the early lump-sum payment and the intermediate repayment from October 31, 2025, to October 31, 2026, Japanese time. Japan is eight hours ahead of Germany, so for you the effective moment still falls on the preceding day.

As the reason, the trustee names that many creditors have not completed the necessary procedural steps to this day, among them identity verification and the lodging of payment details. It is already the third postponement of this kind. Anyone still waiting will find the particulars in our piece on the Mt. Gox repayment deadline. In tax terms the date matters because it fixes the assessment period in which the inflow falls.

The Dividend in Money Meets an Open Point in the Ministry Circular

The second route is the harder one. In the large proceedings, customer claims are not satisfied in coins but valued in money as at the opening date and later paid out as a dividend. At FTX, which opened Chapter 11 proceedings in November 2022, that is the basic structure of the wind-up. In economic terms you therefore receive money for coins you never sold.

On the wording of Section 23 EStG this can be read in two directions. One reading holds that a transfer to third parties for consideration is missing: the coins have perished in the estate, and the dividend is repayment on a claim, hence not a disposal and not taxable. The other reading sees the disposal event already in the conversion of the coins into a monetary claim. It would then turn on whether more than a year lay between the acquisition and the opening of the proceedings, which is almost always the case for holdings from the years before 2022.

Both readings lead to the same result for legacy holdings, namely no tax. They diverge only where the acquisition fell shortly before the collapse. The Ministry circular says nothing about the dividend payment from insolvency proceedings. If your case turns on that question, it is the case for a binding ruling from the tax office under Section 89(2) of the German Fiscal Code or for a tax adviser, and the facts belong openly in the return rather than quietly in a single line.

Payment in US Dollars: The Foreign Currency Balance Is an Asset of Its Own

Here lies a trap that has nothing more to do with the coins. Large proceedings pay out in US dollars. A foreign currency balance is, taken on its own, likewise an “other asset” within the meaning of Section 23(1) sentence 1 no. 2 EStG. With the inflow of the dollars you acquire that asset, and a one-year period of its own begins for it.

If you exchange the dollars into euros within that year and the dollar has gained against the euro in the meantime, a taxable gain can arise from it. That holds even if the underlying coins were long since unobjectionable for tax purposes. The exemption threshold of €1,000 applies here too, because it is the same category of income. Anyone holding the dollars for longer than a year has the question off the table.

Which Units Count as Returned Is Determined by Individual Attribution and FIFO

If only part of your holdings comes back, the question arises which units these are. The Ministry circular names the principle of individual attribution for this. Where individual attribution is not possible, the crypto-assets of one trading designation acquired first count as disposed of for the holding period, and the average method is to be applied for valuation. For simplification it may be assumed that the units acquired first were disposed of first, that is, first in, first out.

On top of that comes a wallet-based view: within one wallet the method chosen is to be retained until all units of that trading designation there have been disposed of. The account at the insolvent exchange was, in this logic, a unit of its own. Anyone who bought there in several tranches over the years has to reconstruct the order before calculating anything at all.

Paragraph 89: Missing Records Are Borne by the Taxpayer

The hardest sentence for those affected sits not in insolvency law but in tax law. The Ministry circular states verbatim at paragraph 89: “Missing records and data losses (for example because of the insolvency of the trading platform or as a result of a hacker attack) are borne by the taxpayer.” The insolvency of the exchange is thereby named expressly, and it is no excuse.

In practical terms that means: the tax office does not have to believe that you bought in 2017 merely because the platform has disappeared. The burden of evidencing the acquisition and its date rests on you. What usually carries weight are bank statements of the original transfer, archived transaction overviews, old confirmation emails from the exchange, blockchain transfers to an address of your own, and the documents from the insolvency proceedings themselves, that is, the filing of the claim and an extract from the schedule of claims. How such a line of evidence is built up, we worked through in the case of stolen coins.

For Foreign Trading Platforms, the Extended Duty to Cooperate Applies

Mt. Gox was wound up in Japan, FTX in the United States and the Bahamas. Almost every known proceeding therefore concerns a foreign operator, and the Ministry circular holds a tightening ready for exactly that. Where crypto-assets are acquired or disposed of through the central trading platforms of a foreign operator, that establishes an extended duty to cooperate under Section 90(2) of the German Fiscal Code. You must then not merely disclose the facts but clarify them and procure the necessary evidence. Expressly named is the regular and complete retrieval of transaction overviews for as long as the platform still exists.

For the tax reports of private providers the circular draws a clear line: a report can carry the audit trail if it appears plausible, is coherent in itself and does not contradict other findings of the authority. Obviously missing acquisition costs or missing trading platforms argue against plausibility. Adjustments and corrections, by contrast, do no harm where they are marked as such and reasoned comprehensibly, for instance because acquisition data is missing after an insolvency. Anyone who has to bring several sources together will find in our comparison of crypto tax software and portfolio trackers the programs that deliver exactly that consolidation and the settings extracts required.

Total Loss Without a Dividend: Section 23 EStG Knows No Write-Down to Zero

If proceedings end without a dividend, or with a dividend close to zero, the question of the loss suggests itself. The answer is uncomfortable. A loss under Section 23 EStG presupposes a disposal event just as a gain does. If the holding falls away without replacement and nothing is transferred, that event is missing, and for privately held assets no loss arises that you could deduct under Section 23 EStG.

Even where a loss is recognised, it is tightly fenced in. Under Section 23(3) sentence 7 EStG, losses may be offset only up to the amount of the gain you achieved from private disposals in the same calendar year. An offset against employment income, interest or share gains is ruled out. Section 23(3) sentence 8 EStG does at least allow a carry-back to the immediately preceding year and a carry-forward to the following years, but there too only against gains of the same kind. Which routes remain in an individual case, we have compiled under crypto total loss and tax.

Self-Custody Takes the Insolvency Risk Out of the Calculation

Everything described above arises only because a third party holds the keys. Coins in a wallet of your own never pass into the control of an exchange and therefore never into an insolvency estate. The question of segregation, dividend and opening date does not arise at all then, and the acquisition records sit in your own documents rather than in the books of a company that can disappear.

You pay the price for it elsewhere, namely in the key risk. Whoever loses the recovery words has no administrator with whom to file a claim. Which programs are suitable for your own custody and where their limits lie is shown by our comparison of software wallets. For larger holdings, separating the trading balance from the long-term holding remains the simplest rule: only what you really intend to move sits in an account belonging to a third party.

Exchange Insolvency: Your Next Three Steps

1. Clarify the form of the return and gather the evidence. Read in the administrator's letter whether coins will be surrendered to you or a claim is being listed in money, and file purchase receipts, transfers and old transaction overviews in one place. A tool from the comparison of crypto tax software holds the acquisition records together with the settings extract the tax office wants to see for plausibility.
2. Move the recovered holding into your own custody. What comes back out of proceedings does not have to land on the next trading account. A device from our hardware wallet comparison takes the holding out of every future insolvency estate, and the transfer to an address of your own is not itself a taxable event.
3. Choose your future trading venue by authorisation and custody segregation. Whether a segregation succeeds when it matters is decided years earlier by the question of whether customer holdings are kept separately. Our overview of regulated crypto exchanges shows which providers are subject to European supervision.

(As of October 7, 2026. This article is not investment advice. Prices and fee structures change; check the terms with the provider before you buy.)