Italy Raises Bitcoin Tax to 42% – Another Blow to Innovation and Financial Freedom

The Italian government has just announced that the tax rate on capital gains from Bitcoin and other cryptocurrencies will skyrocket from 26% to 42% starting next year. This outrageous increase is part of an attempt to “capture” more from the growing adoption of crypto. The Vice Minister of Economy even stated, “Since the phenomenon is spreading, we are taxing it more.” No clearer message could be sent: instead of encouraging innovation, Italy wants to punish it.

This new tax regime will stifle the budding crypto economy in Italy. Up until now, many Italians saw cryptocurrencies as an opportunity to diversify their investments and potentially counter inflation. But with this new punitive 42% rate, Italy sends a strong signal that any profits made in this space will be met with heavy taxation. This will likely push investors to either stop using crypto or move their assets and activities offshore, depriving the country of potential growth and jobs in blockchain and fintech.

The current 26% tax on crypto gains was already controversial, but this drastic jump makes Italy one of the most hostile jurisdictions for crypto traders and investors. It also raises questions of fairness. Why single out crypto assets with such a heavy tax burden compared to traditional investments? The government’s approach seems to ignore the fact that the crypto market is already highly volatile, making it much harder to guarantee profits compared to conventional financial assets.

What’s worse, these changes will hurt ordinary investors and small-time users more than they will hurt large institutions. Many retail investors, who got involved in crypto during the last bull market, will now face complex reporting obligations and heavy taxes if they decide to sell or trade their holdings. The only ones who might benefit are large players with access to expensive tax advisors who know how to navigate these rules.

This is yet another example of policymakers treating crypto users like cash cows. Instead of fostering innovation, Italy is alienating its crypto community at a time when other European nations, such as Switzerland and Portugal, are embracing blockchain technology and welcoming crypto businesses with favorable regulations.