Italy stunned the crypto world recently by announcing that they will raise the capital gains tax of Bitcoin profits from 26% to 42%. How will an increase in capital gains taxes on Bitcoin affect trading in Italian bitcoin markets? Speculation is that traders will simply move to other “offshore” exchanges where such taxes are not an issue. How will capital gains taxes affect your bitcoin profits affect where you choose to buy and sell cryptocurrencies.
Why Are Countries Raising Capital Gains Taxes on Crypto Trading?
We have written about the rampant greed, fraud, and outright stupidity at the top echelons of crypto that became evident during crypto winter. It turns out that greed, at least, is not limited to a few folks in the crypto world. Rather, Italy’s government simply sees crypto taxes as a way to finance campaign promises without angering their constituents who voted for them! Capital gains taxes on Bitcoin. Estimates are that Bitcoin trading in Italy will be about $1.2 billion in total value. That may well be less as Italian Bitcoin traders search for other markets. It would appear that Bitcoin taxes are viewed, in Italy at least, like so-called sin taxes on liquor, tobacco products, and gambling are viewed in the USA. That is, they are ready source of revenue and politicians are commonly free to raise taxes on them without fear of losing votes!
Will Italian Bitcoin Taxes Affect Bitcoin’s Price?
If previous attempts by nations to raise capital gains taxes on Bitcoin are any indication, serious Bitcoin traders will simply move to other venues to trade the leading crypto token. Such was the case when India upped taxes a few years ago and traders simply moved to offshore venues. A great effect on Bitcoin trading will likely come from full implementation of the EU crypt rules, MICA, coming up at the end of 2025. Meanwhile Bitcoin’s price rose by about a sixth over a two month period due to the usual factors that drive its price.
Zeroing in on Wash Traders
Wash trading has been a problem in Bitcoin trading and, over the longer term, has a more profound effect on traders as well as prices than which nations try to increase trading taxes. Bloomberg wrote about how Bitcoin’s worst kept secret is under attack by the FBI. The Feds created their own crypto company, NexFundAI and used it to trap fifteen promoters and traders of digital assets. Both the companies involved and their executives have been charged with wash trading. Essentially, these folks created “sham trades” in order to make their tokens appear to be popular and good investment opportunities.
The Wash Trading Industry
If one is looking for help in creating the appearance of a strong and vital cryptocurrency by was of a massive increase in trading there are folks who actually advertise their services as wash trading experts. As much as $2 billion in Ether wash trading over three years helped distort the token’s price. The action by the Feds serves as a warning to those who repeatedly mess with free crypto markets and distort their pricing. Wash trading does not help honest investors and trades and, in fact, makes an otherwise potentially profitable market dangerous. This is at least one case where governmental action was long overdue and policing a “wild west” aspect of the crypto market.