France Cracks Down on Crypto Tax Loopholes with Bitcoin to USDC Swaps
Key Summary
France's National Assembly has adopted a tax proposal that would treat Bitcoin-to-USDC swaps as taxable disposals, even if investors never withdraw cash, effective January 1, 2027. This change affects investors using stablecoins to reduce market exposure and could alter the timing of tax reporting. The proposal also introduces a new method for calculating gains on older holdings, which may impact investors' tax liabilities.
Overview of Proposed Tax ChangesThe French National Assembly has adopted a tax proposal that would treat Bitcoin-to-USDC swaps as taxable disposals, even if investors never withdraw cash, effective January 1, 2027. This change affects investors using stablecoins to reduce market exposure and could alter the timing of tax reporting.
Impact on InvestorsThe proposed tax calculation concerns the gain above cost. It subtracts the acquisition basis of the assets surrendered from the disposal price. For assets of the same nature purchased at different prices, the proposed replacement would focus on the crypto-assets actually disposed of. This could lead to a change in the cost deducted from proceeds and give older holdings a transition choice.
New Calculation MethodFor assets of the same nature purchased at different prices, the proposed replacement would focus on the crypto-assets actually disposed of. For holdings acquired before 2027, the amendment offers two routes. An investor could use evidenced actual acquisition costs, determined under the new basis rules. Alternatively, the investor could allocate the portfolio acquisition price calculated under the old rules at Dec. 31, 2026 among the assets held then, in proportion to their values on that date. This allocation option preserves a pool of acquisition cost and distributes it among holdings.
Example of Tax ImplicationsConsider a hypothetical investor whose Bitcoin cost €20,000 and is worth €60,000, while their Ether cost €40,000 and is worth €40,000 at the transition date. Under the allocation option, Bitcoin represents 60% of the portfolio value and receives €36,000 of basis. Ether receives the remaining €24,000. Using actual costs instead would leave their bases at €20,000 and €40,000, respectively. The same Bitcoin-to-USDC transaction would then produce different first-disposal gains.
ConclusionThe proposed tax changes in France would treat Bitcoin-to-USDC swaps as taxable disposals, even if investors never withdraw cash, effective January 1, 2027. This change affects investors using stablecoins to reduce market exposure and could alter the timing of tax reporting. The proposal also introduces a new method for calculating gains on older holdings, which may impact investors' tax liabilities.