Italy Abandons Plans to Increase Crypto Capital Gains Tax Amid Backlash and Political Rift

Italy’s government has retreated from a controversial proposal to raise the tax on cryptocurrency capital gains from 26% to 42%, following resistance from industry stakeholders and political divisions within the ruling coalition.

The proposal, initially part of the 2025 budget plan, was designed to boost public revenue. However, the sharp tax increase faced significant pushback. Giulio Centemero and Treasury Junior Minister Federico Freni, both from the League party, announced on December 10 that the hike would be “substantially reduced” during the parliamentary review process.

The revised budget proposal, which includes a moderated approach to crypto taxation, is expected to be finalized by the end of December. Lawmakers are tasked with finding a balance between fiscal responsibility and supporting Italy's growing digital asset industry.

Economic Concerns and Industry Reaction

Critics of the original plan argued it would drive crypto businesses and investors underground, reducing transparency and hindering economic growth. In a joint statement, Centemero and Freni emphasized the importance of fair regulation that encourages innovation rather than deters participation in the market. They also rejected outdated biases against cryptocurrencies, advocating for a more progressive stance.

The proposal initially aimed to generate approximately €16.7 million annually, a relatively minor contribution to Italy’s overall budget. However, its potential to stifle innovation and alienate investors prompted heated debates within the government.

Political Division

Economy Minister Giancarlo Giorgetti, who initially championed the tax hike, faced resistance even within his own party. While Giorgetti framed the measure as a prudent fiscal step, the League party—known for its pro-business orientation—argued it would undermine Italy’s competitiveness and discourage technological advancement.

Amid these internal disagreements, sources suggest that the government may opt to maintain the existing 26% tax rate, reflecting a broader consensus against drastic measures that could harm the nascent digital asset sector.

By scaling back the proposed tax increase, Italy’s leadership aims to support innovation while navigating the complexities of economic policy in a fast-evolving industry. The decision underscores the challenges governments face in balancing revenue generation with fostering a favorable environment for emerging technologies.