The European crypto landscape is undergoing a major transformation with the Markets in Crypto-Assets (MiCA) regulation now in effect. By establishing clear crypto rules, the EU aims to position itself as a global leader in the digital assets industry.
Alongside the EU’s MiCA regulation, individual countries are adding their own rules to manage cryptocurrencies. Italy’s decision to increase its cryptocurrency capital gains tax from 26% to a steep 42% has drawn considerable attention.
This new taxation policy has sparked debates about its sustainability. While Italy’s government likely views the measure as a lucrative avenue for public revenue, expert critics argue it could deter innovation and push investors towards more crypto-friendly jurisdictions.
MiCA’s unified regulatory framework promises to reduce legal ambiguities, foster innovation, and protect investors. But can it balance these goals given the varied economic realities of EU member states?
Experts say Italy’s tax hike could clash with MiCA’s goal of creating uniform regulations that simplify compliance and promote adoption.
Cryptonews interviewed Uldis Teraudklans, Paybis’s Chief Revenue Officer, to better understand the impact this might have. He shared expert insights into what this could mean for Italy and the EU region at large.
Italy’s Crypto Tax Hike: Innovation vs. Revenue Generation
Italy’s decision to raise its cryptocurrency capital gains tax to 42% marks one of the highest rates globally.
This is similar to Japan, which also currently has one of the highest rates, taxing cryptocurrency gains at rates up to 55%.
Teraudklans told Cryptonews:
“While the government’s approach may secure significant revenue from high-growth asset classes, such a steep tax rate risks driving investors and companies to relocate. Excessive tax burdens often lead to capital flight and stifle entrepreneurial ventures.”
Countries like Singapore and El Salvador present an alternative approach, adopting low or zero crypto capital gains taxes to attract global talent and investment.
Singapore’s balanced regulatory framework and El Salvador’s tax-free policy are often cited as strategies to encourage innovation while minimizing the burden on businesses.
Teraudklans also noted that:
“Countries that impose excessive tax burdens often witness an exodus of talent and capital to more favorable jurisdictions.”
He further mentioned that the increased tax rate in Italy could disproportionately impact smaller enterprises and startups.
Often pivotal to technological advancements, these businesses may lack the resources to navigate complex financial and regulatory challenges.
However, it is not all at risk. Teraudklans acknowledged that opportunities exist for compliant platforms and advisory services to help companies adapt, potentially mitigating the policy’s adverse effects.
According to him, Italy’s long-term success in leveraging its crypto market will ultimately hinge on balancing fair taxation with a supportive environment for innovation.
But let’s look at the bigger picture: is this a MiCA problem or an issue with the EU itself?
MiCA: Transforming the EU Crypto Ecosystem
The Markets in Crypto-Assets (MiCA) regulation promises to unify and standardize crypto regulations across the European Union.
MiCA aims to spur innovation while protecting investors by creating a predictable legal environment.
Teraudklans noted:
“One of MiCA’s key strengths lies in its comprehensive approach. It’s designed to mitigate fraud and money laundering while enhancing transparency, ultimately fostering consumer confidence.”
However, MiCA’s stringent licensing requirements and compliance costs pose challenges, particularly for smaller firms.
Market dynamics could shift as larger players consolidate their positions, potentially reducing competition.
Additionally, the regulation’s stablecoin provisions—mandating EU-regulated entities for reserve custody—may complicate operations for major issuers like Tether. This could disrupt liquidity until alternative solutions emerge.
The requirement for stablecoin issuers to maintain fully liquid reserves matching their tokens in circulation, subject to regular audits, poses significant operational challenges.
For instance, Tether is required to hold 60% of its reserve assets in cash stored in EU banks. This stringent oversight impacts Tether’s operational flexibility and creates more uncertainty in the market, as evidenced by Coinbase’s decision to delist USDT amid fears regarding its compliance under MiCA.
Despite these hurdles, MiCA’s investor protection measures are expected to drive mainstream adoption. Teraudklans told Cryptonews:
“A silver lining is that MiCA’s investor protection measures, aimed at mitigating fraud, money laundering, and market manipulation, are likely to enhance consumer confidence.”
The regulation’s success, however, will depend on its ability to balance fostering innovation with enforcing robust safeguards. If executed effectively, Teraudklans believes that MiCA could position the EU as a leader in the global crypto market.
Global Comparisons: Lessons from Other Regions
The European Union’s comprehensive approach under MiCA contrasts sharply with the regulatory landscapes of other major markets, such as the United States and Asia.
While the EU’s unified framework offers clarity, other regions provide lessons in adaptability and stakeholder engagement.
Teraudklans said:
“The US faces significant challenges with its fragmented regulatory environment, where agencies often clash over jurisdiction. In contrast, MiCA’s unified approach sets a valuable precedent.”
In contrast to both, Asian markets present a mixed picture. Countries like Japan and Singapore have excelled in strengthening AML measures and consumer protections, offering models for effective regulation.
Although taxation is still a problem in Japan, the country has clear regulations governing the use and acceptance of cryptocurrencies.
However, MiCA’s success will depend on its ability to evolve with the EU’s rapidly changing digital asset landscape.
Teraudklans mentioned that building mechanisms for regulatory updates and incorporating industry feedback will be critical. To do it, Teraudklans suggests:
“Observing how other regions incorporate feedback and make course corrections could offer valuable insights.”
Conversely, if MiCA excels well, other regions could draw inspiration from its structure to create balanced policies that encourage growth while safeguarding investors.
Navigating MiCA’s Implementation in 2025
With MiCA’s enforcement now in effect, businesses and investors must adapt quickly to the new regulatory landscape.
Exchanges and Crypto Asset Service Providers (CASPs) are required to integrate advanced tax-reporting tools and align their operations with MiCA’s provisions.
To streamline the adoption, Teraudklans advises companies to “look inward to innovative solutions like Zero-Knowledge Proofs (ZKPs) that are already helping to shape compliance.”
Teraudklans also suggests AI adoption for operational efficiency:
“I think we should focus on embracing regulation while also leveraging technologies such as AI to reduce the high expenses of running and maintaining a licensed business on one hand and to protect the customers on another.”
Notably, Teraudklans also encourages businesses to see this not as a challenge to overcome but as an opportunity to embrace.
MiCA provides a unified framework that enables businesses to operate with clarity across all member states, while giving investors confidence to participate in a regulated and protected market.
For crypto companies, this might become a clear opportunity to expand within the EU under a cohesive regulatory environment. For investors, MiCA could offer stronger consumer protections and clearer market rules.
However, regulators face a critical task in ensuring a smooth transition, especially given disparities in crypto adoption among EU member states.
By the end of 2025, compliance rates and market outcomes will reveal whether MiCA has been truly transformative—or whether challenges remain for the EU’s crypto ecosystem.
About Uldis Teraudklans
Uldis Teraudklans is the Chief Revenue Officer at Paybis, a cryptocurrency exchange that aims to facilitate the buying and selling of digital assets. With a robust background in fintech and a keen understanding of the cryptocurrency landscape, Teraudklans has been instrumental in driving Paybis’s growth and expanding its market presence.
His expertise spans various aspects of digital finance, including regulatory compliance, market analysis, and customer engagement strategies. Prior to his role at Paybis, he served as CEO of Nexpay, where he focused on enhancing payment solutions and fostering innovation within the digital currency sector.
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