Czech Republic Sweetens the Deal for Long-Term Crypto Holders with New Tax Exemption

The Czech Republic is making a significant move to encourage long-term cryptocurrency investment. President Petr Pavel has signed a bill into law that exempts Bitcoin and other cryptocurrencies held for more than three years from capital gains tax. This landmark legislation, coupled with recent proposals to diversify the national bank's reserves with Bitcoin, positions the Czech Republic as a potentially crypto-friendly nation within the European Union.

Tax Breaks for Hodlers: A New Incentive for Crypto Investors

The new law, unanimously approved by the Czech parliament in early December, aims to simplify the tax landscape for crypto investors. Not only does it eliminate capital gains tax on holdings of three years or more, but it also exempts transactions under 100,000 koruna (approximately $4,100) from reporting requirements. This is a significant departure from many jurisdictions, where every crypto transaction is typically considered a taxable event. Importantly, the tax exemption also applies retroactively to cryptocurrencies purchased before 2025, providing a clear incentive for existing holders.

Aligning with Europe, But Going Further: The Czech Crypto Approach

This tax reform is part of a broader effort by the Czech Republic to align itself with the European Union's Markets in Crypto-Assets (MiCA) regulatory framework, which came into effect late last year. However, the Czech Republic is going a step further by actively incentivizing long-term holding.

Political Support and Potential Central Bank Investment

The country's pro-crypto stance is further emphasized by recent statements from prominent political figures. Andrej Babiš, a billionaire and former Prime Minister, has called for balanced cryptocurrency regulations and fair tax policies.

Adding to the momentum, the Czech National Bank's board recently approved a proposal to explore investing in new asset classes, including Bitcoin. The bank's governor suggested a potential allocation of up to 5% of its €140 billion ($146 billion) reserves to Bitcoin, reflecting a growing interest in the cryptocurrency as a potential reserve asset.