If passed, the measure would subject French cryptocurrency holders to a 31.4% capital gains tax each time they exchange a cryptocurrency for a stablecoin. Analysts agree this would prompt French crypto holders to consider alternatives to park their digital assets.
Key Takeaways
- French lawmakers narrowly passed a proposal to tax crypto-to-stablecoin swaps with capital gains tax.
- The measure targets a tax loophole, which could limit traders’ ability to park gains tax-free.
- The controversial rule faces an upcoming Senate vote before potentially taking effect in January 2027.
France’s National Assembly Adopts Crypto-To-Stablecoin Exchange Taxation
France is on the verge of tightening its cryptocurrency regulation framework, putting taxation front and center.
On Friday, as part of the 2027 Finance bill debate, the National Assembly discussed and adopted Amendment I-3898, which proposes taxing crypto-to-stablecoin exchanges with capital gains tax.
Filed by MP Nicolas Sansu and passed by the Finance Committee last week, the amendment passed by a narrow 38-37 vote with 25 abstentions: out of 577, only 100 MPs participated in the vote.
The amendment seeks to plug what French legislators called a regulatory loophole, considering that stablecoins fulfill some functions of money, including making payments and other investments.
Currently, these exchanges are not taxed, which the proposal argues deprives the government of a valuable tax resource that “does not create any new burden,” as the amendment stresses. Nonetheless, the landscape of digital assets in France would change extensively if the proposal reaches law status.
Arbitrage and speculative trading activities would suffer, as traders generally use stablecoins to park earnings to avoid being taxed before exchanging them for fiat currencies. Chainalysis determined that 90% of France’s crypto gains go undeclared, with only 24,000 French taxpayers declaring nearly $427 million in gains for 2024.
Analysts have lamented this development, claiming that French crypto holders will be deprived of a tool to avoid the volatility of the cryptocurrency market, and that stablecoin adoption will be hampered as a result.
The popularity of commodity digital assets such as gold-linked tokens could also rise as French crypto holders rotate into these alternatives to try to mitigate volatility losses. Nonetheless, the solution remains imperfect, as gold also faces high volatility periods.
As the proposal remains controversial and divisive, the Senate might step in and change it or reject it entirely. French media indicates that the government, which remains opposed to this measure, could exclude this amendment or approve the bill’s first iteration without amendments, so the proposal can still change before the budget bill approval.
However, if passed without changes, taxation of crypto-to-stablecoin exchanges will become effective on January 1, 2027, with its delivery to the Senate being decided by vote next Tuesday.