Italian Crypto Users Shocked: Government Proposes 42% Tax on Cryptocurrency Income

Italy's government has come up with a new proposal - to introduce stricter regulations on crypto income. If approved, crypto holders will pay a 42% tax on gains generated from their digital assets. It's worth mentioning that the current tax rate is 26%, so the increase is too sharp.

It happens as a result of the state's unsuccessful fiscal policy, which has created significant gaps in the budget. Trying to fill these gaps, the government appears to have targeted cryptocurrency users, whom the Italian Ministry of Finance seems to view as "rolling in wealth."

The sector itself is expanding, with colossal income levels. So, why not tap into it for more revenue?

What is interesting, financial products backed by cryptocurrency, such as Bitcoin ETFs and ETPs, will still be taxed at the current rate. In this way, the primary target of the tax increase is direct cryptocurrency investments.

This move will likely lead to issues. The tax increase could open legal loopholes, and lawmakers may face challenges regarding the constitutionality of the law. But if approved, Italy will become the jurisdiction with the highest taxation on crypto gains in the world.

Will Italian crypto users invest in crypto further? I think this law can make this activity less alluring. At the same time, it may urge investors to relocate their digital assets to more crypto-friendly jurisdictions.  So, instead of boosting the country's budget, Italy could end up losing a valuable source of revenue. 

Why is it important for the whole industry?

Italy's decision could be a reference point for future governmental approaches to crypto regulation since it will set precedents for other countries grappling with similar challenges.

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