The Italian crypto sector is very worried because there is a growing belief that if the increase in taxes on crypto capital gains in Italy were to be effectively approved, its impact could be devastating.
Several signatories of the open letter published at the end of last week by a large list of industry operators explain it.
The crypto sector in Italy and the potential catastrophic impact of the new taxes
The measure, officially presented at a press conference by the Italian Deputy Minister of Economy Maurizio Leo, provides for the increase from 26% to 42% of the taxation on capital gains from the sale of cryptocurrencies in Italy.
This measure does not provide for an increase in taxation on capital gain on other financial assets, but only on that potentially produced by crypto sales.
Furthermore, it is a measure that would impact only the Italian crypto sector, without any impact on the global crypto sector. In fact, there was no reaction from the crypto markets to the news.
In the open letter sent to the MEF (Ministry of Economy) and the Italian Government, it is stated that the 42% tax rate on crypto capital gains harms technological innovation in Italy.
In Italy, there are as many as 150 VASP (Virtual Asset Service Providers) registered in the official OAM register, and the sector in the country generates an income of about 2.7 billion euros, with an increase of 85% compared to 2023.
It is therefore not an irrelevant sector, also because according to the official data from OAM, in June 2024 there were more than 1.3 million people in Italy who held crypto-assets with authorized intermediaries. To these, we must add all those who instead hold them on non-custodial wallets.
Italy has about 59 million inhabitants, so the measure would concern at least more than 2% of the entire population.
The impact on the Italian crypto sector
The open letter states that the increase in taxation would put the Italian crypto services industry at a significant disadvantage, undermining innovation and the country’s attractiveness for investors, start-ups, and tech talents.
Furthermore, it would slow down the development in Italy of innovative projects supported or based on crypto-assets, making it more difficult for companies to attract capital.
In fact, within a less favorable fiscal context, investors and companies would shift focus and operations to countries with more flexible and attractive regulations, such as the nearby Switzerland where there is no taxation on capital gains.
In other words, there would be a drain of capital and “brains” from the Italian crypto sector to foreign crypto sectors, such as the Swiss one, which is one of the largest in Europe. A “brain drain” would also be encouraged in sectors like computer science, cryptography, and digital law, which are crucial for the challenges of digitalization, leading to an impoverishment of human capital and a loss of competitiveness in the long term.
There is even the possibility that in the end, over time, all this will result in a decrease in tax revenue for the Italian State, because it will be primarily the larger capitals that flee.
The amendment
Not all Italian politicians, however, agree with this measure.
A member of the Lega, Giulio Centemero, stated that he intends to present an amendment to Parliament to prevent the measure from being approved.
The measure proposed by Deputy Minister Leo, who instead belongs to Fratelli d’Italia, has not yet been approved.
It is included in the draft of the financial maneuver that will be presented to Parliament this week.
The financial maneuver of 2025 must be approved by December 31, 2024, and concerns actions that will be undertaken in 2025. From now until the end of the year, Parliament can amend the draft of the text, until reaching a final text that should probably be approved by the end of December.
So if Centemero’s initiative is successful – which is not guaranteed – the measure proposed by Leo can be removed from the final text of the budget, or modified.
In the course of the next few days, it will be known whether the amendment will actually be presented and put to a vote, what it will entail, and whether it will be approved by Parliament.
The joint attack of Consob and ECB
The road to achieving the approval of the amendment will not be simple at all.
In fact, along with the announcement from Deputy Minister Leo, two pieces of news have been published that reinforce the idea that a portion of Italian and European politics is hostile to the crypto sector.
The first concerns the statements of Consob Commissioner Federico Cornelli in the Catholic newspaper Avvenire.
Cornelli even cites the Social Doctrine of the Church, according to which saving also has a social function. In this regard, he argues that cryptocurrencies do not have a social function, thus justifying repressive measures against, indirectly, even the Italian crypto sector.
Against crypto have also spoken the economists of the European Central Bank Ulrich Bindseil and Jurgen Schaaf, famous for having predicted the collapse of the crypto sector in November 2022 when FTX closed.
Bindseil and Schaaf argue that Nakamoto’s original promise to provide the world with a global means of payment has not materialized, and that most economists claim that the boom of Bitcoin is just a speculative bubble that will eventually burst. They also say that Bitcoin does not increase the productive potential of the economy, and the wealth effects on consumption of the early Bitcoin holders can occur only at the expense of the consumption of the rest of society.
To tell the truth, this very last intervention, given the past actions of Bindseil and Schaaf in 2022, has paradoxically increased the positive sentiment on Bitcoin, since precisely during this October 2024 a new bullrun could theoretically begin.
For now, however, even the joint attack by Consob and the ECB has not managed to dissuade the honorable Centemero from presenting his amendment; however, presenting it is one thing, but getting it approved is another.
