Italy is considering raising its capital gains tax on crypto to 42% as part of efforts to reduce the fiscal deficit.

Bitcoin (BTC) holders could soon face nearly two-fold tax increase in Italy, as the government plans to raise the capital gains tax on crypto from 26% to 42%, Bloomberg reports.

During a conference call on Wednesday, Italy’s deputy finance minister Maurizio Leo noted that the government is responding to the rapid growth of crypto usage, stating that the phenomenon is “spreading” quickly. The report did not provide a timeline though for when the new tax might be implemented though.

Italy is not alone in its approach to crypto taxation. Other nations, like India, have also grappled with similar issues, resulting in declines in local trading volumes as investors shift to offshore markets.

Italy treading well-established track

As Coin Insider Daily reported earlier, crypto trading and mining profits in India are subject to a flat 30% tax. Staking income is also taxed, though based on the individual’s income tax slab, potentially offering a lower rate.

The potential tax increase coincides with Italy’s preparations to adopt the European Union’s Markets in Crypto-Assets regulations, scheduled to take effect by the end of 2024.

The proposed changes could potentially reshape Italy’s crypto landscape. Earlier in July, Bank of Italy Governor Fabio Panetta suggested that MiCA, which includes provisions for electronic money tokens and asset-referenced tokens, may conflict with existing Italian law, hinting at a selective implementation of these guidelines.