A recent research report by Coincub and Blockpit highlights how varying tax policies, from zero taxes in the UAE to high rates in the U.S., shape crypto investment strategies.

The crypto taxation landscape varies widely across the globe, as revealed by a research report from Blockpit and Coincub.

Data reveals that the UAE remains an attractive destination for crypto investors, with no personal income or capital gains tax on cryptocurrency gains for individuals. Similarly, Switzerland positions itself as a tax haven, offering zero personal income and capital gains tax on crypto gains.

In Europe, the situation is more mixed. While some nations provide favorable tax conditions for long-term holdings, others maintain elevated tax rates. For example, Denmark has one of the highest personal crypto tax rates globally, with up to 53% of long-term and short-term capital gains from crypto being taxed by the local watchdog.

The report notes that, on average, many European countries impose relatively high taxes on crypto gains, but the old continent “has the most tax breaks for long-term hodling your Bitcoin.”

Meanwhile, the United States has the highest total gains and average tax rates of 17.5% (long-term) and
23.5% (short-term), what could potentially bring in tax revenues approximately $1.87 billion, the analysts estimate. They warn that high taxation could “discourage investment,” pushing crypto activities underground, or force investors to relocate to more tax-friendly jurisdictions.

“Nations like Vietnam, Turkey, and Argentina might prioritize attracting crypto investment, fostering technological innovation, and providing alternatives to unstable local currencies over immediate tax collection.”

Blockpit

Analysts indicate that the global approach to crypto taxation is set to undergo significant changes starting in 2025, driven by international initiatives such as the Crypto-Asset Reporting Framework and the Tax Administration for the Reporting of Crypto-Asset Activities.

Developed by the Organization for Economic Co-operation and Development, CARF aims to enhance tax transparency and combat tax evasion by creating a global framework for reporting crypto transactions. In parallel, TARKA is designed to facilitate cooperation among tax authorities in the 48 participating countries, per the report.

Denmark is set to pioneer an unprecedented tax reform by introducing a tax on unrealized capital gains for cryptocurrencies, starting January 1, 2026. This bold move aims to integrate cryptocurrencies such as Bitcoin into the existing financial taxation framework, treating them similarly to other investment assets. 

The Tax Law Council has recommended this tax to apply to future acquisitions and cryptos acquired as far back as Bitcoin’s inception in January 2009.

Denmark To Introduce Tax on Crypto Unrealized Gains

According to the press statement, Denmark will impose a 42% tax on unrealized capital gains for all crypto assets. This crypto tax will apply to assets like Bitcoin, which are not backed by any physical assets or fiat currencies. Consequently, the law if passed will bring these digital assets under the same taxation rules as traditional investments. 

The government intends to align the crypto taxation with the existing rules for other investment types, such as stocks and bonds.

Moreover, the new tax policy will affect crypto purchased as far back as the genesis block of Bitcoin in 2009. Hence, anyone holding cryptocurrencies will be subject to this 42% tax rate on unrealized gains, regardless of whether they sell their holdings.

Tax Minister Rasmus Stoklund expressed support for the developments stating,

“Throughout recent years, there have been examples of Danes who have invested in crypto-assets being heavily taxed. That is why I am pleased that the Tax Council has today submitted some elaborate and up-to-date recommendations. The council’s recommendations can be a way to ensure more reasonable taxation of crypto investors’ gains and losses.”

Regulatory Challenges and Investor Impact

The introduction of this crypto tax will address the complexities of taxing digital assets. The decentralized nature of cryptocurrencies has made taxation difficult for both authorities and crypto holders. To solve this, Denmark plans to introduce additional regulatory measures.

The Danish government announced that starting in 2027, they will exchange data on Danish crypto investors internationally. They also plan to introduce a bill in early 2025 requiring crypto service providers to report customer transactions. This will help Denmark regulate approximately 300,000 Danes who own crypto-assets and curb potential tax evasion.

In addition, the government will allow investors offset losses from one crypto against gains in another, as well as gains on financial contracts. This approach will correct the current taxation system’s asymmetry, which heavily taxes investors on gains.

These developments coincide with Italy’s efforts to tighten its control over digital assets. Recently, Italy announced plans to increase its capital gains tax on cryptocurrencies, raising it from 26% to 42%. This change is part of Italy’s broader effort to boost government revenue by taxing profits from cryptocurrency investments.

✓ Share:

Ronny Mugendi

Ronny Mugendi is a seasoned crypto journalist with four years of professional experience, having contributed significantly to various media outlets on cryptocurrency trends and technologies. With over 4000 published articles across various media outlets, he aims to inform, educate and introduce more people to the Blockchain and DeFi world. Outside of his journalism career, Ronny enjoys the thrill of bike riding, exploring new trails and landscapes.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.