The Danish Tax Council has recommended what it terms non-backed crypto assets like Bitcoin be taxed similarly to asset-based crypto assets. The council argues the recommendations would allow crypto investors to deduct losses from gains thus making taxation more fair. However, some observers believe this amounts to a “declaration of war on crypto” as it would tax unrealized capital gains.

Recommendations Seek to Align Crypto Taxation

A Danish tax body, the Tax Council, has recommended that “non-backed crypto-assets” like bitcoins should be “stock-taxed” in accordance with rules that already apply to the taxation of asset-based crypto-assets. This, according to the Tax Council, aligns the treatment of such crypto assets with that of other types of investments.

In a statement issued on Oct. 23, the Danish Taxation Ministry said the council’s recommendations will bring clarity to both the tax authorities and crypto-owning citizens who were unsure of the applicable tax rules. Rasmus Stoklund, Denmark’s Tax Minister, argues that the latest recommendations ensure a fair tax treatment of gains or losses incurred by crypto investors.

“Throughout recent years, there have been examples of Danes who have invested in crypto-assets being heavily taxed. That is why I am pleased that the Tax Council has today submitted some elaborate and up-to-date recommendations. The council’s recommendations can be a way to ensure more reasonable taxation of crypto investors’ gains and losses,” Stoklund said.

According to the Tax Council’s recommendations, crypto investors will be able to deduct losses from gains, as opposed to the current system in which losses cannot be deducted. Danish authorities argue that these recommendations make the taxation of crypto assets more fair.

War on Crypto

However, some observers, like Mads Eberhardt, believe the recommendations propose capital gains tax of up to 42% amount to a “declaration of war on crypto.” In a post on X reacting to the unveiling of the recommendations, Eberhardt, a cryptocurrency analyst at Steno Research, said their adoption would make Denmark the first country in the world to tax unrealized capital gains on crypto. He added:

“This will affect not only crypto acquired from that date but also crypto obtained as far back as the genesis block of Bitcoin in January 2009.”

Some bitcoiners reacting to the unveiling of the recommendations slammed Danish tax authorities and urged fellow bitcoiners to flee the country.

Meanwhile, the Taxation Ministry’s statement said Stoklund will present a bill on the taxation of crypto-assets in early 2025. The bill is expected to include the Tax Council’s recommendations.