Opinion by: Robin Singh, CEO of Koinly
If Brazil’s recent action is any indication, crypto might be the initial tax avenue for governments seeking additional revenue.
In June, Brazil eliminated its tax exemption for small crypto profits and imposed a uniform 17.5% tax on all capital gains from digital assets, irrespective of the amount. This move is part of a broader strategy by the Brazilian government to enhance revenue through increased taxation on financial markets.
This goes beyond a mere local tax adjustment. A clear trend is surfacing where governments seek new methods to extract tax from the crypto asset class. Worldwide, policymakers are re-evaluating crypto as a potential revenue source.
A global trend is starting to take shape
Earlier in 2023, Portugal introduced a 28% tax on crypto gains held for less than a year, marking a significant shift for a nation that historically treated crypto as tax-exempt.
The pressing question is how long countries with favorable crypto tax policies can maintain their stance before adopting similar measures, and who will be the next to tighten regulations.
Take Germany, for instance, where crypto gains are exempt from capital gains tax if the assets are held for over a year. Additionally, gains up to 600 euros ($686) per year remain tax-free even for holdings under a year.
Meanwhile, the UK provides a broader tax-free allowance of 3,000 pounds ($3,976) on capital gains for all assets, including crypto, although this figure was reduced by 50% from 6,000 pounds in 2023, hinting at further potential reductions ahead.
The gray area for retail investors is narrowing
While the adjustment may seem minor, further lowering the 3,000-pound threshold could yield substantial tax revenue, especially considering recent Financial Conduct Authority (FCA) data indicating that 12% of UK adults now own crypto.
It’s hard to dismiss this possibility, particularly as UK government debt rises.
The phase of retail crypto investors enjoying a lenient regulatory environment is coming to an end. With the maturation of the crypto market and ongoing price increases, governments are starting to take notice of the prominent media coverage surrounding crypto’s rapid growth.
This is particularly evident in emerging markets, where governments face mounting pressure to address budget shortfalls without triggering political backlash from more visible or controversial tax increases.
No other asset has matched Bitcoin’s average annualized return of 61.2% over the last five years.
Governments view crypto as a soft target
Fortunately, crypto presents a relatively easy target for taxation by governments. It’s often characterized as risky and speculative, mainly perceived as benefiting the affluent. While taxing it is less contentious publicly, it carries potential downsides for everyday investors and startups.
Related: Japan’s crypto tax overhaul: What investors should know in 2025
For instance, Brazil’s 17.5% tax structure has disproportionately impacted small traders.
While larger institutions can absorb such costs or shift to more favorable jurisdictions, regular users, particularly those relying on crypto to save in inflation-affected economies, are the ones who bear the burden.
With the likelihood that additional governments will adopt Brazil and Portugal’s approach, the era of low-tax or tax-free crypto investments may soon conclude.
The issue isn’t whether other crypto-friendly countries will tighten their taxation; it’s how swiftly and severely they will act.
Opinion by: Robin Singh, CEO of Koinly.
This article is for general informational purposes and should not be considered legal or investment advice. The opinions expressed herein are those of the author and do not necessarily reflect the views of Cointelegraph.
