Authored by: Robin Singh, CEO of Koinly
In times of economic pressure, governments often turn to readily available revenue streams, and cryptocurrency might just be the next target, as evidenced by recent actions in Brazil.
This past June, Brazil eliminated its tax exemption on minor cryptocurrency profits and instated a uniform 17.5% tax on all capital gains derived from digital currencies, irrespective of the sum. This decision was a component of a larger initiative by the Brazilian administration to augment income via increased levies on financial dealings.
This extends beyond a simple domestic tax adjustment. A distinct trend is developing where governments are actively seeking methods to extract increased tax revenue from this asset class. Worldwide, policymakers are reassessing cryptocurrency as a viable source of income.
A Worldwide Trend Begins to Emerge
As recently as 2023, Portugal implemented a 28% tax on cryptocurrency profits from holdings held for less than a year. This marked a significant shift for a nation that had historically regarded cryptocurrency as tax-exempt.
The pertinent question now revolves around how long nations with favorable cryptocurrency tax regulations can maintain their stance before succumbing to similar measures, and which country will be the next to tighten regulations.
For instance, Germany currently excuses cryptocurrency gains from capital gains tax if the assets are kept for over a year. Even for holdings of less than a year, gains up to 600 euros (approximately $686) annually remain free from taxation.
Simultaneously, the United Kingdom grants a more encompassing 3,000 pounds (roughly $3,976) capital gains tax-free allowance on all assets, encompassing cryptocurrency. However, this amount was reduced by 50% from 6,000 pounds in 2023, hinting at potential future reductions.
The End of the Retail Investor’s Gray Area
While seemingly minor, further decreasing the 3,000-pound threshold could yield considerable tax revenue, particularly given recent data from the Financial Conduct Authority (FCA) indicating that 12% of UK adults currently possess cryptocurrency.
It’s difficult to dismiss the possibility of further adjustments, especially considering the UK’s escalating government debt.
The age of regulatory leniency for retail cryptocurrency investors is drawing to a close. As the cryptocurrency market matures and prices continue their upward trajectory, governments are paying close attention to media coverage highlighting cryptocurrency’s rapid expansion.
This is especially relevant in developing nations, where governments face mounting pressure to bridge budget deficits without triggering political opposition from more overt or contentious tax increases.
No other asset rivals Bitcoin’s impressive average annual return of 61.2% observed over the last five years.
Cryptocurrency: An Accessible Target for Governments
Fortunately, cryptocurrency is a relatively straightforward tax target for governments. It’s often viewed as high-risk, speculative, and predominantly benefiting affluent individuals. While taxing it is generally less controversial with the public, it also presents drawbacks, particularly for everyday investors and burgeoning startups.
Related: Decoding Japan’s Crypto Tax Reforms: A 2025 Investor’s Guide
For instance, Brazil’s 17.5% framework disproportionately affects smaller traders.
While larger institutions possess the ability to absorb these costs or relocate to jurisdictions with more accommodating regulations, ordinary users, including those employing cryptocurrency for savings in economies susceptible to inflation, ultimately shoulder the burden.
Given the increasing likelihood that other governments will emulate Brazil and Portugal’s approach, the era of minimal or no cryptocurrency taxation may be coming to an end.
The critical question isn’t whether other cryptocurrency-friendly nations will reinforce their grip on cryptocurrency taxation; it’s the speed and severity with which they will do so.
Authored by: Robin Singh, CEO of Koinly.
This piece is intended solely for informational purposes and should not be construed as legal or financial counsel. The perspectives, thoughts, and opinions articulated herein are solely those of the author and do not necessarily represent the viewpoints of Cointelegraph.