France's proposed crypto tax sparks controversy; experts warn it could stifle innovation, harm ecosystem development, and ultimately lead to capital outflows.

France Plans to Introduce a Controversial Wealth Tax Amendment, First Time Including Cryptocurrency in the “Non-Productive Wealth” Tax Category

This move has sparked strong opposition from industry experts, who warn that the policy could stifle innovation, hinder ecosystem development, and lead to capital outflows.

France Wealth Tax Reform: Cryptocurrency for the First Time Included in “Non-Productive Wealth” Tax

According to Decrypt, the French National Assembly recently approved Amendment I-3379, officially classifying cryptocurrencies as “non-productive wealth” for tax purposes. This marks the first time France has explicitly targeted crypto assets in its tax policy, taxing them alongside gold, yachts, and classic cars.

Under this decision, individuals with net assets exceeding $2.2 million (approximately €2 million) will be required to pay an annual tax of 1%. However, the amendment does not provide any tax exemptions or reductions for cryptocurrencies. Experts have strongly criticized this move, arguing that it could “kill innovation and suppress industry growth,” potentially causing many crypto talents and capital to flow out of France.

New Legislation: 1% Wealth Tax Applies to Cryptocurrencies

The amendment stipulates that individuals with net assets over $2.2 million will be taxed at a rate of 1% annually. While the law exempts certain long-term leased properties from taxation, cryptocurrencies are not granted similar privileges and are instead categorized as “non-productive wealth.” This means that regardless of whether crypto assets are sold, they will be subject to the annual tax.

The bill was proposed by centrist legislator Jean-Paul Mattei, aiming to encourage long-term investment. However, the inclusion of cryptocurrencies in the non-productive asset category has sparked widespread criticism.

Experts Warn: No Distinction Between Different Types of Crypto Investors

Many experts believe the biggest flaw of this new law is its failure to differentiate between various types of crypto investors. Joe David, founder and CEO of digital asset services firm Nephos, stated that the simplified treatment of cryptocurrencies could “unintentionally harm founders and ecosystem builders who have contributed years to the industry and taken significant risks.”

He pointed out that the policy does not offer reasonable tax leniency for crypto founders, token issuers, or contributors to ecosystem development, which could encourage capital flight and diverge from global crypto tax standards.

Burçak Ünsal, partner at ÜNSAL Law Firm, added that the lack of tax exemptions for token issuers could create “negative incentives” for builders within the crypto ecosystem, potentially discouraging long-term token holding and affecting project sustainability.

Risks of Heavy Taxation: Increased Capital Outflows

Austin Yuanlun Yin, a CPA registered in Australia and chair of the Global Crypto Tax Committee, expressed concern about the proposal. He believes that taxing cryptocurrencies as “non-productive wealth” could accelerate capital outflows, as cross-border transfers of digital assets are rapid and investors can move their holdings to countries with more favorable tax regimes within minutes.

“Classifying digital assets like Bitcoin alongside yachts and art sends the wrong signal—treating crypto as idle capital rather than a source of innovation,” Yin said. He emphasized that policymakers should recognize the vital role of crypto assets in funding startups, decentralized infrastructure, and digital innovation.

Legislative Progress: Senate Review Pending

The bill has already passed the National Assembly and will now be reviewed by the Senate. Legislators are scheduled to discuss it over the next 70 days, with a final decision expected before December 31, 2025.

Cryptocurrency Taxation Analysis: Is France’s New Wealth Tax Fair?

What Is the “Non-Productive Wealth” Tax?

The recently approved French wealth tax amendment explicitly includes cryptocurrencies in the “non-productive wealth” category. Under current French tax law, non-productive wealth includes assets that do not generate income or appreciation, such as yachts, artworks, and precious metals like gold and silver. Previously, France’s wealth tax mainly targeted fixed assets and luxury goods, but this amendment classifies cryptocurrencies as non-productive assets, meaning holders must pay a 1% annual tax regardless of whether they trade or hold them.

Why Are Cryptocurrencies Included in This Tax Regime?

The government aims to promote more capital flow into productive assets like real estate and long-term investments by taxing “non-productive wealth.” The law intends to encourage investments that generate economic benefits rather than accumulating and hoarding assets that do not appreciate. However, this approach seemingly overlooks the unique nature of cryptocurrencies, especially their role as long-term investment tools and decentralized financial infrastructure.

How Do Experts View This Tax Policy?

Many experts argue that the measure is overly simplistic and fails to account for the complexities of the crypto market. For example, founders and teams may hold large amounts of tokens as part of their long-term projects, which may not have appreciated yet. Simply categorizing cryptocurrencies as “non-productive wealth” could unintentionally penalize those actively developing projects and supporting the ecosystem.

Furthermore, experts highlight the lack of clear definitions for “professional investors” versus “casual investors,” which could lead to tax management confusion. How to distinguish between these types of holders remains an unresolved issue.

How to Address These Concerns?

Experts generally recommend that the French government adopt a more nuanced approach, considering the unique characteristics of cryptocurrencies. For instance, providing tax exemptions or reductions for founders, teams, and ecosystem builders who hold tokens long-term could prevent unfair tax burdens on those committed to project development.

Additionally, policymakers should collaborate internationally, learning from other countries’ experiences with crypto taxation, to craft policies that align with global standards while fostering domestic innovation.

Conclusion: The Future of France’s Crypto Taxation

France’s proposed crypto tax has undoubtedly sparked significant debate within the industry. Experts warn that without clear definitions and detailed rules, this policy could hinder the growth of the crypto sector and even accelerate capital flight. As global standards for crypto taxation evolve, whether France can maintain its competitiveness in digital assets will depend on how effectively this policy is implemented and whether adjustments are made along the way.