Why the Proposed Tax Hike on Bitcoin is Unfair

An Upcoming Increase in the Capital Gains Tax from 26% to 42%. A Decision, Far Removed from Europe, that Generates Discontent and Promotes Evasion

“Bitcoin capital gains: since this phenomenon is spreading, we foresee an increase in the withholding tax from 26% to 42%.” This was stated by Maurizio Leo, Deputy Minister of Economy and Finance, while presenting the 2025 budget bill. The proposal immediately appears unfair compared to the typical 26% rate for financial activities, and the unusual reasoning of “since it is spreading” does not go unnoticed.

What Leo only hints at, Capponi clarifies in Milano Finanza: according to “sources close to drafting the law,” the rate hike aims to discourage investment in cryptocurrencies, favoring the “social function of saving” when it serves the “real economy and the country’s growth.”

If there were any remaining doubts, Cornelli, Consob commissioner, dispels them in an article in Avvenire: “Savings in cryptocurrencies do not have fundamental social utility characteristics.” For this reason, it is legitimate to “calibrate the taxation [of investments] depending on how they fit into the transmission system that links finance and the economy.” Cornelli adds that nothing is “affected in terms of possession, which remains perfectly allowed.” A perhaps residual respect for the Italian bishops’ “do not steal” and “do not covet others’ belongings” from the Mosaic Decalogue.

The words of Abi president Patuelli are paradoxical: “I understand that someone is protesting because there was a […] preferential tax rate […] Why should institutions favor bitcoin?” Since the 26% was not a benefit, and the 42% is instead discriminatory, one wonders if this is ignorance on fiscal issues or intellectual dishonesty.

An Unfair and Discriminatory Proposal

The proposal violates basic principles of tax equity and equality by introducing a distinction between direct investments in crypto-assets, taxed at 42%, and indirect investments through investment funds (ETFs, etc.) or derivatives that would remain at 26%. It is unfair because it is discriminatory; the intent is evident, even endorsed by Cornelli. Furthermore, it is unconstitutional since “the law determines the appropriate programs and controls so that public and private economic activity can be directed and coordinated for social and environmental purposes” (art. 41), but the Constitution does not assign lawmakers a role in guiding investments and savings; rather, it “encourages and protects savings in all its forms” (art. 47).

The European and International Context

Europe, moreover, has a radically different view of the crypto phenomenon than Italian lawmakers and regulators. The preamble to the Markets in Crypto-Assets regulation states that “the Union has a political interest in developing and promoting the adoption of transformative technologies in the financial sector […] which, together with the crypto-assets sector itself, will lead to economic growth and new job opportunities for Union citizens.”

The crypto issue even has relevance in the U.S. presidential race. Trump declares that “Bitcoin represents freedom, sovereignty, and independence from government coercion and control.” He promises to establish a Bitcoin reserve as a “national strategic reserve” and asserts, “We will have regulations, but the rules will be written by people who […] want to see the [crypto] industry thrive, not sink.”

The Italian Crypto Industry

As highlighted in the latest report by the Organismo Agenti e Mediatori (OAM), Italy has 150 Virtual Asset Service Providers, and the sector is worth €2.7 billion, an 85% increase from 2023: a significant industry that generates revenue and jobs.

If the tax rate increase materializes, the unfavorable fiscal environment would diminish the relevance of the Italian market: companies would shift their focus and operations to countries with more attractive capital gains regulations, such as Switzerland (no tax) or Germany (no tax on investments held for at least 12 months). Italy, therefore, risks losing strategic expertise and infrastructure tied to crypto-assets, ending up with a less dynamic and globally competitive digital ecosystem.

The Reasonableness of Crypto Investment

The 3.6 million Italians who have invested in crypto (source: Blockchain Observatory of the Politecnico di Milano) anticipated Blackrock and Fidelity, international leaders in asset management: in January, they launched the Bitcoin ETF, quickly surpassing $30 billion in assets. Bitcoin has been the most profitable asset of the past decade, currently the ninth largest by market capitalization globally.

The reasonableness of Bitcoin investment is rooted in its low correlation with other asset classes: it reduces portfolio risk with an equal expected return (source: Digital Gold Institute), so much so that the Certified Financial Analysts (CFA) Research Institute Foundation has recommended a 2.5% portfolio allocation to Bitcoin since 2021.

Furthermore, as highlighted in the latest OAM report, 65% of crypto investors are under 40. Mingardi in Corriere della Sera observed that “the low propensity to save among young people is the subject of constant financial education efforts. The gap between the world of financial intermediaries and digital natives does not help: cryptocurrencies are instead part of the latter’s world, and they invest their savings there. Does it make sense to target the preferred investment tool of their generation?”

A Persistent Misunderstanding

In 2022, Bank of Italy Governor Panetta, then on the ECB board, described crypto-assets as “a gamble, […] a bet disguised as an investment tool,” and added that “instruments similar to gambling should be treated as such.” A bizarre suggestion, but useful today: gambling is taxed between 8% and 20% when the operator is the state, up to 25% when managed by others.

But also, Minister Giorgetti: “Savers should know the difference between investments that finance tangible projects and other forms of investment like cryptocurrencies, whose value is disconnected from underlying assets.”

The problem is that many still do not understand Bitcoin: a digital asset that is transferable but not duplicable, as scarce in the digital realm as nothing before it. Scarcity allows it to acquire value: the Mona Lisa is beautiful but has an inestimable market value because it is unique; if billions of copies existed, the market value would drop to zero. Bitcoin’s scarcity mirrors that of gold in nature: Bitcoin is the digital equivalent of gold. If we reflect on gold’s role in the history of civilization, currency, and finance, Bitcoin’s relevance in the current digital civilization and the future of currency and finance becomes clear. What the internet has been for information, Bitcoin is for value transmission.

Revenue Effectiveness

The tax revenue estimates are negligible: less than 17 million euros. Too little to risk accusations of unconstitutionality and destroy future revenue potential. The disproportionate rate increase would, in fact, have the counterproductive effect of pushing significant crypto capital abroad. As Einaudi argued, “illegal capital exporters are benefactors of the Fatherland because capitals flee when governments [are] reckless and […] by taking them elsewhere, they save them from destruction and preserve them for future use when common sense returns.”

Additionally, the majority of investors holding crypto-assets directly or through unauthorized intermediaries would be incentivized to remain underground. In fact, others would also be driven towards opaque, unauthorized operators. Finally, to limit tax impact, smaller investors may realize capital gains by the end of 2024, causing market distortions, only to re-enter Bitcoin through ETFs taxed at 26%.

The Political Failure of the Proposal

Ironically, it was this very government that, with the 2023 budget law, filled a significant legislative gap, finally providing a clear but improvable tax framework. This intervention removed investor uncertainty, allowing compliance with tax obligations. This progress would now be compromised by an unreasonable and unjust rule change, increasing discontent and promoting evasion.

Additionally, the rate hike proposal represents a striking contradiction of the government’s declared intent to avoid tax increases and support young people and businesses. Indeed, the League has already distanced itself: Centemero, president of the Finance Committee, stated that the proposal “is counterproductive because it drives people underground, whereas we want to protect small savers, support a growing market that is the future and used by many Italians. Additionally, there is a geopolitical alignment issue: we work with Musk and support Trump, and their position is clear.” Soon after, Forza Italia (Occhiuto), the Democratic Party leadership (Misiani), the Five Star Movement, and members of the Mixed Group (Marattin) also spoke against the increase.

Conclusions

Those who fear an oppressive state can find comfort and hope in Einaudi’s words, which value tax resistance, even when forced to become fraud: “It is not a bad thing that the attempt to force everyone to pay the high Italian rates encounters lively resistance. Persistent [tax] fraud forces reflection on whether it might be better to reduce rates to encourage taxpayers to better advice. Tax evasion is therefore not always fruitless: it is owed to it if some reductions in rates were achieved; and more will be obtained when everyone becomes convinced of the need to simplify and soften the harshness and complications of our laws.” As a citizen and investor, I note the injustice of the proposed rate increase with dismay, its reasoning with concern, the protests it has raised with sympathy, and the resistance initiatives that will be taken with full approval.

As an industry entrepreneur, I am even more worried: my company is requesting authorization confirmations to operate under the new European Markets in Crypto-Assets regulation. Assessments and controls are entrusted to the Bank of Italy

and Consob: if these are the cultural prejudices with which they will approach the issue, I fear for us and for the Italian crypto industry.

For this reason, along with major industry companies, we have requested a dialogue with the Ministry of Economy and Finance. The appeal has also been signed by top professionals and leading academic institutions in the crypto field. Solutions can be found to increase revenue, support the country’s economic growth without injustice, preserve investor trust, and support entrepreneurs, such as incentives to bring underground activities into the open and encourage service providers to take on tax withholding roles.

Only with balanced regulation can Italy seize the opportunities offered by the crypto ecosystem and allow the development of a modern, inclusive, and competitive financial system. With its savings capacity, Italy has the opportunity and necessity to position itself as a hub for financial innovation: to do so, it needs fair, growth-oriented tax policies, not punitive and discriminatory ones.