Italian cryptocurrency investors were taken by surprise when Deputy Economy Minister Maurizio Leo proposed to almost double the capital gains tax for Bitcoin, from 26% to as high as 42%. The announcement sparked immediate backlash from the crypto community and raised questions about Italy's future as a friendly jurisdiction to the sector in general.

The proposed hike comes as part of Italy’s broader financial planning, with the country's right-wing government already greenlighting a $33 billion budget for 2025, partly financed by charges on Italian banks and insurers.

If implemented, it would position Italy at the top of the list with the highest capital gains tax on cryptocurrency in Europe. Currently, Denmark is at 42%, Norway 38%, and Finland 34%. The target of the proposed Italian rate is Bitcoin, among other financial instruments, catapulting Bitcoin into a very different situation.

Indeed, the announcement has already set tongues wagging about capital flight, with investors openly threatening to shift their cryptocurrency operations to more tax-friendly jurisdictions.

Paolo Ardoino, CEO of stablecoin issuer Tether, ridiculed the logic behind the proposal, posting in Italian that the government essentially believes the more successful something is, the more it should be taxed.

The proposed hike reflects the increasingly changing face of cryptocurrency taxes across the European Union. Portugal, once a haven for crypto investors with its zero capital gains tax policy, implemented a 28% tax rate last year for digital assets held less than a year.