Opinion by: Robin Singh, CEO of Koinly
Recent actions by Brazil suggest that cryptocurrencies may become the first tax avenue explored by governments seeking to boost revenue.
In June, Brazil eliminated its tax exemption for small crypto gains and implemented a flat 17.5% tax on all capital gains from digital assets, regardless of their size. This move is part of a larger initiative by the Brazilian government to enhance revenue through increased financial market taxation.
This change signals more than just a local adjustment. A discernible trend is developing where governments are uncovering ways to extract higher taxes from cryptocurrencies. Worldwide, policymakers are reassessing crypto as a potential revenue source.
A global pattern is beginning to emerge
Earlier in 2023, Portugal introduced a 28% tax on crypto gains held for less than a year, marking a substantial shift for a nation that previously treated crypto as tax-free.
The pressing question is how long countries with favorable crypto tax policies can maintain their stance before following suit, and which nations might be next to impose stricter regulations.
Germany, for instance, currently exempts crypto gains from capital gains tax if assets are held for over a year. Gains below €600 ($686) annually remain tax-free even for shorter holdings.
In the United Kingdom, there’s a wider £3,000 ($3,976) capital gains tax allowance on all assets, including crypto, though this amount was reduced by 50% from £6,000 in 2023, indicating potential further reductions ahead.
Retail investor gray zone coming to a close
While it may appear as a minor change, further lowering the £3,000 threshold could yield substantial tax revenue, particularly given recent Financial Conduct Authority (FCA) data showing 12% of UK adults now own crypto.
It’s difficult to think such a possibility is completely off the table, especially as UK government debt rises.
The period when retail crypto investors benefited from regulatory leniency is waning. As the crypto market matures and prices climb, governments are increasingly aware of the media coverage surrounding crypto’s rapid expansion.
This is notably true in emerging markets, where governments face intensifying pressure to address budget deficits without provoking political backlash from more overt or contentious tax increases.
No other asset compares to Bitcoin’s average annualized return of 61.2% over the last five years.
Crypto is an easy target for governments
Fortunately, crypto is a relatively straightforward tax target for governments. It’s frequently viewed as risky, speculative, and primarily advantageous to the wealthy. While taxing it tends to be less controversial among the public, it carries drawbacks, especially 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 disproportionately impacts small traders.
While larger institutions can absorb these costs or relocate to more favorable jurisdictions, everyday users, including those using crypto to save in inflation-prone economies, incur the burden.
With the likelihood increasing that other governments will emulate Brazil and Portugal’s measures, the phase of low-tax or tax-free crypto investment may be nearing its conclusion.
The key question isn’t whether other crypto-friendly countries will tighten their taxation policies; it’s the speed and intensity of their actions.
Opinion by: Robin Singh, CEO of Koinly.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
