Bitcoin is the best-known cryptocurrency and is often equated with digital money. In fact, Bitcoin is a substitute currency that is not issued by a state or a central bank. This guide explains in plain steps what Bitcoin is technically, how the blockchain works and which risks the German financial regulator BaFin names. It deliberately contains no price forecast and no buying recommendation.
Short answer: According to BaFin, Bitcoin is a substitute currency that is not issued by the state. Its value is volatile and not guaranteed by any public body. With crypto assets you can lose the money you invest entirely, and no deposit guarantee applies (BaFin consumer page, page dated 13 December 2023, checked November 2026).
Key points at a glance
- Bitcoin is a cryptocurrency whose ledger (the blockchain) is kept jointly by many computers, not by a bank.
- As BaFin describes it, the value equals only what the other side is willing to pay for it.
- Prices fluctuate sharply, a sale is not guaranteed, and a total loss is possible.
- If you hold crypto assets yourself, you bear the risk of losing access, for example through lost keys.
- There is no deposit guarantee as for bank balances. With platforms, your position is governed by insolvency law.
What is Bitcoin, and what is a cryptocurrency?
A cryptocurrency is a digital unit of account secured by cryptographic methods that can be transferred without a central body. Bitcoin was the first of these units and serves many others as a template. BaFin describes Bitcoin as a substitute currency that is not issued by the state and notes that its value is volatile. In practice this means there is no issuer who supports the value or promises that you can swap the units back at a particular price.
The difference from a balance on your current account (Girokonto) matters. There you hold a claim against your bank for a fixed amount in euros. With Bitcoin no such claim exists against anyone. You hold entries in a ledger that you can transfer to others, and the price results solely from supply and demand. Payments in Bitcoin are therefore possible only where the recipient accepts them voluntarily.
How does the blockchain work?
The blockchain is a shared ledger that records all transactions. It is not stored in one place but on many computers in the network. New transactions are collected, checked and appended to the existing ledger in blocks. Each block is cryptographically linked to the previous one, so later changes become visible. BaFin names miners among the participants, meaning those who take part in confirming transactions.
- You create a transfer from your wallet to the recipient’s address and sign it with your private key.
- The transaction is broadcast across the network and checked for validity by the participants.
- Miners bundle checked transactions into a new block and attach it to the chain.
- As further blocks follow, the transaction counts as increasingly firmly confirmed.
This process replaces the bank as an intermediary. It does not replace the question of who is responsible for mistakes. A wrong address or a lost key cannot be fixed with a customer hotline.
Where is your Bitcoin held, and who has access?
Crypto assets do not sit “in” a wallet. The wallet manages the keys with which you dispose of entries in the ledger. Whoever has the private key can transfer the units. BaFin distinguishes two basic routes whose risks differ markedly.
| Custody | Who holds the key? | Typical risk according to BaFin |
|---|---|---|
| Self-custody (own wallet) | You | Loss of access, not only through hacker attacks but also through your own carelessness |
| Custody with a service provider (platform, wallet provider) | The provider | There is no protection mechanism like for bank deposits; your legal position is governed by insolvency law |
Which risks does BaFin name?
BaFin calls crypto assets highly speculative and highly risky on its consumer page. The overview below summarises the points it names (page dated 13 December 2023).
| Risk | What it means |
|---|---|
| Price swings | Prices are extremely volatile, and retail investors can hardly assess the factors behind them. |
| Total loss | With coins or tokens, the money invested can be lost entirely. |
| No guarantee of sale | With crypto assets of low market volume there may hardly be any buyers. |
| No deposit guarantee | No protection systems exist for crypto assets as they do for bank balances. |
| Stablecoins | Private stablecoins are meant to be pegged to a currency or asset but carry considerable risks according to BaFin and are not monitored by any supervisor. |
| Certificates and CFDs | According to BaFin they do not make the investment less risky, they only ease access and add higher costs and issuer risk. |
A worked example shows why swings are more than a number on a screen. Assumption: you invest 1,000 euros and the value falls by 50 percent to 500 euros. To get back to 1,000 euros, a rise of 100 percent would then be needed. This is plain arithmetic and says nothing about future prices.
Who supervises Bitcoin and other crypto assets in Germany?
By its own account on its consumer page (page dated 13 December 2023), BaFin supervises trading platforms, crypto ATMs and crypto custodians in Germany. It does not supervise project initiators, miners or the protocols of Bitcoin, Ether or Litecoin. Supervision of issuance exists only if a crypto token is legally a security, an investment product or a fund, or exceptionally e-money. That a provider is supervised also says nothing about the quality of the crypto assets traded. The BaFin page dates from December 2023. Responsibilities and licensing rules for providers have developed since then through the European MiCA Regulation. For the current position, the up-to-date BaFin consumer page is what counts.
What to look for in platforms and what European regulation means for providers is covered in Krypto-Börsen mit MiCA-Lizenz: Woran du seriöse Anbieter erkennst (in German) and MiCA-Übergangsfrist: Was Krypto-Nutzer jetzt wissen müssen (in German). According to the BaFin page dated 13 December 2023, an ETF consisting of a single crypto asset such as Bitcoin may not exist in Germany. Crypto ETNs are legally debt securities there. Whether this still applies unchanged is something to check on the current BaFin page.
How is Bitcoin taxed?
Crypto assets can be relevant for tax as soon as you sell, swap or pay with them. The details, the current rules and the plans for changes from 2027 are covered in separate guides so that this one can focus on the technology: Krypto und ETF im Studium: Steuern einfach erklärt (in German) and Was ändert sich 2027 bei Krypto und Staking? Stand der Pläne (in German).
Frequently asked questions
Is Bitcoin legal tender?
BaFin describes Bitcoin as a substitute currency that is not issued by the state. No state guarantees its value, and nobody has to accept Bitcoin as payment. In everyday life what counts is whether the recipient accepts it voluntarily.
Can I lose everything with Bitcoin?
Yes, BaFin explicitly points to the possibility of a total loss. This includes price losses, but also loss of access or the insolvency of a custodian. Only invest amounts whose loss you can bear.
Is there a deposit guarantee for crypto assets?
No, according to the BaFin page there are no such protection systems for crypto assets. With platforms, the legal position of customers is governed by insolvency law. How this looks in practice depends on the provider and the contract terms.
Are Bitcoin tips on social media reliable?
BaFin advises checking tips on social media critically. How to recognise unreliable financial tips is explained in Finfluencer in Social Media: Woran du unseriöse Finanztipps erkennst (in German).
What to do now
- Clarify your goal first: do you want to understand the technology, pay with it or invest? Different standards apply to each.
- Read BaFin’s risk notes and compare them with your financial situation. An emergency fund and reserves come first.
- Before using any platform, check whether the provider is supervised and how custody and insolvency are regulated.
- Plan for taxes and document purchases and sales from the start.
- If you want to place investments in the context of your overall situation, personal advice is available, for example from Academycon (How we work, in German).
Related guides
- Geld, Konto und Kredit: Der Überblick für junge Erwachsene (in German) (hub)
- Aktien erklärt: Was Einsteiger über Risiken wissen sollten (in German)
- Krypto-Börsen mit MiCA-Lizenz: Woran du seriöse Anbieter erkennst (in German)
- Krypto und ETF im Studium: Steuern einfach erklärt (in German)
- Geld anlegen im Studium: Erste Schritte für Anfänger (in German)
Sources: BaFin, consumer information on crypto assets (English version, page dated 13 December 2023).
Last updated: November 2026. This guide is general information, not individual advice.
