Berlin has long been seen as something of a hub of bitcoin activity, but Germany as a whole has lagged slightly behind the UK in terms of bitcoin popularity… until now.

For the first six months of the year, the UK was home to a higher number of downloads of the original bitcoin client (Bitcoin-Qt) than Germany. Since then, Germany has taken the lead, with 19,248 Bitcoin-Qt downloads taking place in the country from 1st July to the time of writing, compared with 16,826 in the UK.

Those based in Germany have also been giving CoinDesk more attention over the past few months. In June and July, our fifth biggest audience was the Germans, moving up the ranks to fourth between August 1st and today.

Germany-based exchange Bitcoin.de has also experienced a surge in local traffic recently. Oliver Flaskämper, managing director of Bitcoin Deutschland GmbH, which operates Bitcoin.de, said the press is partly to thank for this.

He thinks the media’s attitude towards bitcoin has become a lot more positive over recent months, which has helped to improve the public perception of digital currency.

“While previously only the most negative associations, such as buying drugs on the internet, were discussed, more is now written about the growth of bitcoin acceptance,” Flaskämper added.

Bitcoin regulation in Germany

He also puts bitcoin’s recent growth in Germany down to the government’s decision to take a stance on digital currency. Last month, BaFin (the German ministry of finance) announced it does not consider bitcoin to be e-money or a functional currency. Instead, it referred to it as “private money” and a “financial instrument”.

This made Germany the first country in the world to have a clear-cut set of rules applicable to bitcoins, enabling companies in the space to carry out their business safe in the knowledge they are operating within the applicable guidelines.

Just last week, Bitcoin.de received confirmation from BaFin that it has no objections to the exchange’s partnership with Fidor Bank. The partnership means customers will soon be able to trade on bitcoin.de in near real-time using a free FidorPay giro account.

Elsewhere in the world, bitcoin companies have been facing problems when it comes to finding banking partners. For example, US company Tradehill recently had to cease bitcoin trading due to “operational and regulatory issues” faced by its bank – the Internet Archive Federal Credit Union.

For now, bitcoin’s status in Germany has been decided upon, which has somewhat legitimised the digital currency. Stefan Greiner, of German law firm Xenion Legal, said he has no idea whether legislation around bitcoin will be discussed in the future but said discussions seem to be on hold at the moment as a new government is being formed.

However, he believes the biggest risk for the bitcoin community in Germany still comes from within the government in the form of “these elderly bureaucrats and politicians who think the credit card is the greatest invention of all time (in financial services) and that there’s nothing to add to it”.

Merchant acceptance

Merchant acceptance of bitcoin in Germany, or at least Berlin, is going from strength to strength.

Joerg Platzer, who runs “the first bricks and mortar business in the world that accepted bitcoin” (bar/restaurant ROOM77), said he has seen a massive increase in the number of customers who pay in bitcoin.

“From about one [customer] a month about 2.5 years ago when we first started, it has increased steadily to up to ten a day,” he explained.

Platzer, who is also a founding member of the Berlin-based Crypto Currency Consulting Group, said Germany has a very large and innovative bitcoin community centred in Berlin’s ‘Bitcoin Kiez’. This neighbourhood is home to a number of merchants that accept bitcoin and host digital currency events. He added:

“The shops, events and people living here are giving bitcoin high visibility and inspiring a lot of people to look into bitcoin. It is really the network effect starting up.”

German online game developer Bigpoint only started accepting bitcoin payments last week, but has already processed a few transactions ranging between $2 (around 0.016 bitcoins) and $100 (around 0.804 bitcoins).

The company’s CEO Khaled Helioui said he’s not surprised Berlin is emerging as a bitcoin hub because it has long been a hotbed of startups.

“I can see bitcoins getting traction there as there is no specific attachment to local currency, extremely high international diversity and really high tech/digital penetration and savviness,” he added.

Innovation

One company that has been closely following the rise of bitcoin in Germany is Bit-Card, which was founded in February of this year.

The company produces paper wallets, but in the form of coloured plastic cards that are the same size as a credit card. As well as empty wallets, the company sells pre-paid versions, which come already loaded with the user’s selected amount of bitcoins. They can also be customised to include the customer’s name and a picture/background of their choice.

Carsten Unger, managing partner at Bit-Card said: “In an effort to make Bit-Cards as secure as possible we use purpose build cards that are not only thicker than normal credit cards, but also contain a black core. On top there is a unique, tamper evident hologram and additional security to protect the private key.”

Bit-Card is starting to make a name for itself and has provided personalised Bit-Cards as conference passes for the attendees of the European Bitcoin Convention that is currently taking place in Amsterdam.

This is by no means the first bitcoin startup to come out of Germany, and certainly won’t be the last. If the bitcoin scene in the country continues at its current velocity, it’s plausible that it could become the world’s bitcoin epicentre, so long as those “elderly bureaucrats” don’t get too involved.