The Czech Republic just made a bold move in crypto regulation.
President Petr Pavel has officially signed a new law that exempts Bitcoin and other cryptocurrencies from capital gains tax – if they’re held for more than three years.
The decision, which aligns crypto taxation with traditional stock investments, is set to take effect in mid-2025. But that’s not all.
The country’s central bank is also considering adding Bitcoin to its reserves, a move that could shake up financial policy in ways we haven’t seen before.
No More Taxes After Three Years Until now, Czech crypto investors faced a flat tax of 15% on profits from selling digital assets, with higher rates of up to 23% for high-income individuals.
That meant anyone making substantial gains had to share a chunk with the tax authorities, just like they would for stocks or other investments.
But under the new law, anyone who holds Bitcoin (or any other digital asset) for over three years won’t owe a single koruna in capital gains tax when they sell.
This change might sound simple, but it’s a big deal.
The Czech Republic is one of the first countries in the European Union to offer this kind of long-term tax benefit for crypto investors.
The move mirrors Germany’s approach, where holding crypto for more than a year already grants tax-free status.
By implementing this, the Czech Republic shows itself as one of the more crypto-friendly nations in Europe. Prime Minister Petr Fiala even pointed out that everyday crypto transactions will now be easier. Previously, if you paid for a coffee using Bitcoin, you might have technically triggered a taxable event. Now, the new law eliminates reporting requirements for transactions under CZK 100,000 (about $4,100), making it more practical to actually use crypto as currency.
Czech National Bank Eyes Bitcoin Reserves While the tax exemption is big news, there’s another development brewing that could have an even bigger impact. The Czech National Bank (CNB) is currently reviewing a proposal to add Bitcoin to its foreign exchange reserves.
CNB Governor Aleš Michl suggested that the central bank allocate up to 5% of its reserves to Bitcoin. If approved, this would amount to a potential $7.3 billion investment in BTC. But, as expected, not everyone is on board. European Central Bank (ECB) President Christine Lagarde has already voiced her opposition, stating that Bitcoin is too volatile and lacks the liquidity needed for central bank reserves. Still, Governor Michl has been pushing for greater diversification of reserves ever since taking office in 2022.
The CNB has already increased its gold holdings significantly, and adding Bitcoin could be a continuation of that strategy. Michl believes Bitcoin’s lack of correlation with traditional assets makes it an attractive hedge. However, he has also acknowledged the risks, stating that Bitcoin could even go to zero:
He has also stated that he will respect the findings of a study the bank is conducting on the matter, which means we’ll likely have to wait several months before any final decision is made.
What Does This Mean for Crypto in Europe?
These two moves – the tax exemption and the potential Bitcoin reserves – are happening at a time when the European Union is rolling out its own crypto regulations.
The EU’s Markets in Crypto-Assets (MiCA) framework aims to create unified rules across member states, and the Czech Republic’s new tax law aligns with these efforts.
But the CNB’s Bitcoin proposal is another story. If the Czech Republic moves forward with this, it would be a rare case of a European central bank embracing Bitcoin.
Most central banks, especially in the EU, have dismissed the idea of holding crypto in reserves. If the CNB follows through, it could influence other nations to reconsider their stance.
Will Other Countries Follow? The Czech Republic’s tax policy shift is likely to attract more crypto investors and businesses. It could also put pressure on neighboring countries to rethink their own taxation policies – for example Poland, which now has more Bitcoin ATMs than El Salvador.
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