Capital gains taxation: what will happen to crypto?

What are cryptocurrencies and crypto assets…

A classic “definition” of cryptocurrencies reads: “Cryptocurrencies, also known as crypto coins, are digital or virtual currencies that use cryptography to secure transactions and create new units. They typically operate on a decentralized network via blockchain technology, which means no central authority (such as a bank or government) is needed to validate transactions.”
Right.

Cryptocurrencies can essentially take the form or serve the function of:

• Payment instruments, such as the well-known Bitcoin, which—at least to my knowledge—often lead to highly speculative investments by so-called “believers” or otherwise;
• Platform coins (smart contract platforms), supporting various decentralized apps and smart contracts. Ethereum (ETH) is a pioneer in this regard and relatively popular in Belgium, among others;
• Stable coins, which, as I understand it, aim to offer value stability by being pegged to, for example, the US dollar (… although… stability?) or other underlying assets;
• So-called Privacy coins (not my friends), designed to make transactions fully anonymous, including Monero (XMR), which offers strong privacy protection;
• So-called Utility tokens, which grant access to a service or ecosystem, such as Chainlink (LINK), which connects smart contracts to external data, or Uniswap (UNI), a token of a decentralized exchange;
• So-called Governance tokens, which may sound relatively harmless in terms of speculation, as they essentially grant holders voting rights within a blockchain project (e.g., decisions on protocol changes), yet they are indeed tradable on the market for highly volatile values.

In short, all cryptocurrencies appear to incorporate a payment dimension, but primarily also an investment dimension, and in my personal estimation, an investment of a rather speculative nature, especially in the absence of any real underlying value.
Holding cryptocurrencies clearly amounts to holding a form of wealth.

For the sake of (relative) completeness, I believe the so-called security tokens also deserve a honourable mention. These are legally considered “securities” under the Belgian Act of 2 August 2002 on the supervision of the financial sector and financial services, if they grant holders rights equivalent to those of shares, bonds, other non-equity securities, or other financial instruments (cf. Art. 2, 1°, a, and 31°, c, of the Act of 2 August 2002). We will see that these fall under the scope of the new generalized capital gains tax.

Finally, it is worth briefly referring to a category of other crypto assets outside the realm of cryptocurrencies. These essentially concern unique crypto assets that are not fungible with others, including digital artworks and collectibles, crypto assets representing services or physical assets that are unique and non-fungible (e.g., product warranties or real estate), and which cannot be used for payment or investment purposes. These “non-cryptocurrencies” are often described under the generic term NFTs (Non-Fungible Tokens).

These “non-cryptocurrencies” can, as will become clear, be considered financial assets if they can be used in a market for payment or investment purposes. However, they are still movable assets, albeit in my view not necessarily movable objects (to be discussed further). As such, capital gains realized on these assets may in principle be taxable either as professional income, or as miscellaneous income at 33%, and sometimes under the new 10% capital gains tax (see further).

In preparing the fiscal analysis that follows, I did a bit of homework. Anyone can easily download the “crypto.com” app,and if you browse it without paying close attention, you may find yourself having bought cryptocurrencies before you know it. A quick swipe to the right and two clicks later, and you’re the proud owner of a crypto artwork worth €1,350.

In fact, for amounts that a normally wealthy person would consider quite normal—even everyday—the fungible and non-fungible crypto markets are within easy reach. The difference is that you can sell your fungible crypto to anyone who wants your type of coin, while your non-fungible crypto artwork can only be sold to someone who specifically wants your unique piece. The app does create a market for such purchases and investments, which will be relevant further in this analysis.

Taxability as Professional Income

It cannot be ruled out that in some more extreme cases, capital gains realized on cryptocurrencies may be taxable as professional income. In our Personal Income Tax lectures, we teach that a professional activity implies a continuous engagement with a certain time investment, using professional or at least pseudo-professional tools, and aimed at generating a genuine professional income of a reasonable level (and carried out in a manner that can reasonably lead to such income).

In the crypto world, it is certainly not excluded that a more than relevant number of “crypto nerds” have immersed themselves to such an extent that their earnings become taxable as professional income. This includes individuals actively involved in crypto mining (the creation of additional crypto coins), those present on the market or operating through a self-developed platform, for whom crypto activity constitutes a daily, demonstrably pseudo-professional activity not overshadowed by any other “normal” (remember?) professional occupation.

These individuals and situations are not the primary focus of this blog.

Taxability of Crypto Returns as Miscellaneous Income at 33%

Before proceeding, it is appropriate to briefly isolate a specific type of crypto return: “staking rewards” (or “staking awards”). These are rewards received when one agrees to lock up crypto coins (a “stake”) to support a blockchain network. It is a way to earn passive income from crypto, comparable to interest on a savings account. This return is therefore taxable as interest at 30%.

Beyond that, prima facie, there seems to be “nothing new under the sun,” whatever a recent article in HLN, prompted by the 2024 Annual Report of the Ruling Commission, might suggest.
Were it not for the fact that the nature of crypto assets can lead to uncertainty…
Nothing new…

Anyone who trades—also in crypto—within the boundaries of normal management of one’s private estate currently enjoys tax-free returns. Those who exceed that boundary are taxable on speculative miscellaneous income at a rate of 33%.

Where is that boundary?

“I know it when I see it” only gets you halfway there. And yet…
Whether one trades (still tax-free today) within the framework of normal private asset management is, of course, a matter of fact, assessed using a variety of parameters or criteria. Meeting one of these criteria alone rarely (if ever) leads to a speculative gain. Meeting two of them, however, significantly increases the risk.

A reference to several relevant criteria—providing a proper interpretation of what is commonly accepted—was very usefully included in the Explanatory Memorandum to the new capital gains tax law. These include:

• The scale of the resources deployed (often viewed in relation to total invested capital);
• Use of borrowed funds;
• Frequency of transactions and/or speed of purchases/sales (active trading);
• Complexity of the transactions;
• Use of pseudo-professional tools (such as automated processes or software for crypto assets), or activities closely linked to a professional occupation.

Considering that a father or mother may manage private assets with some degree of expertise, insight, and a reasonable dose of market knowledge, I do not believe that investing in crypto assets—of any kind—necessarily leads to taxable miscellaneous income. The assessment of whether a trading approach is speculative can, in my view, still be made based on the above criteria.

If one wishes to obtain a ruling on the matter, they are invariably referred to the now-standardized questionnaire of the Ruling Commission:

“vragenlijst_cryptomunten_2022.pdf”

I read in it a confirmation of the classical doctrine regarding transactions that may or may not fall within the scope of normal private asset management.

And the “new twist” discussed in HLN?

Well, the Ruling Commission assumes that if someone engages in certain transactions outside the scope of normal private asset management, they do so for the entirety of their transactions—even those that follow a “buy-and-hold” strategy. That seems logical to me. Once one crosses the Rubicon (“Alea iacta est…”), it applies to all their crypto dealings. One cannot claim: this transaction falls within normal private asset management, the other does not…

Private Assets Consisting of Portfolio Securities and Movable Property

What follows may not be entirely uninteresting—and is actually somewhat new…

Article 90, 1° of the Belgian Income Tax Code (WIB) is generally considered the legal basis (at least until 31 December 2025) for the exemption of capital gains realized within the framework of normal private asset management. But… that provision is not an exemption clause at all. It is a provision that renders virtually everything imaginable outside professional activity taxable—unless one falls under the exception. And… that exception only applies to transactions involving private assets consisting of real estate (OK, not our focus here), portfolio securities, and movable objects (roerende voorwerpen).

So the question is… can capital gains on crypto assets even fall under the exemption?
Are crypto assets movable property, or movable objects? Here we’re talking about NFTs, crypto artworks, etc.

When reviewing the legislative texts regarding the new generalized capital gains tax, the Council of State seems to express doubt on this point—and rightly so, in my view (even though this is less relevant for the new 10% tax, which we’ll discuss further below). Common sense suggests that a crypto asset can be many things, but not an “object” in the physical sense, which the term “movable object” seems to imply.

Nevertheless, it is currently assumed—correctly, in my opinion—that capital gains on such crypto assets realized by individuals outside professional activity may be exempt. This can only be based on the notion that such crypto assets qualify as “portfolio securities.”

Indeed, anyone using the “crypto.com” app, for example, will likely recognize that virtually every form of crypto asset can be acquired and disposed of in a manner that essentially makes it a portfolio security.

In my view, all crypto assets that are tradable on an online market qualify as portfolio securities. This includes NFTs. The fact that they are inherently unique and non-fungible is not decisive. They are clearly movable rights, and given their online tradability, they can form part of an investment portfolio.

This conclusion aligns with the statement in the draft Explanatory Memorandum to the new 10% capital gains tax, which explicitly states: “An NFT that can be traded on a marketplace may be used for payment or investment purposes.”

Application of the New Generalized Capital Gains Tax at 10%

Crypto assets are explicitly subject to the capital gains tax. This was clear from the very first draft texts.

The draft legislation refers broadly to: “… any digital representation of a value or right that can be electronically transferred and stored, using distributed ledger technology or similar technology, including non-fungible tokens that may be used for payment or investment purposes.”

Technically speaking, tokens that qualify as financial instruments under the MiFID regulation fall outside the scope of Regulation 2023/1114 (Art. 2, §4, a), which the texts refer to, and are thus outside the definition of “crypto assets.” However, since these are considered “securities,” they are subject to the new capital gains tax on that basis.

Note also that the legislation explicitly includes “…non-fungible tokens that may be used for payment or investment purposes.” This aligns perfectly with the earlier conclusion that these NFTs can qualify as portfolio securities, as they can be used for investment purposes and traded on an online market.

Not all NFTs are financial assets that trigger the new tax upon realization of capital gains. Each NFT and its practical function must be assessed individually—not based on terminology or marketing labels. A NFT that can be traded on a marketplace may be used for payment or investment purposes. Capital gains realized on such NFTs are therefore subject to the new tax.

A helpful clarification in the draft Explanatory Memorandum states that capital gains realized on “special NFTs” not subject to the 10% tax must still be assessed in light of potential taxation at 33% if realized outside the scope of normal private asset management. This confirms our earlier analysis (cf. “portfolio securities”).

The Memorandum refers to: “unique crypto assets that are not fungible with other crypto assets, including digital artworks and collectibles, crypto assets representing services or physical assets that are unique and non-fungible, such as product warranties or real estate, etc., which cannot be used for payment or investment purposes.”

Personally, I note that through “crypto.com” certain digital artworks do have online marketability and may therefore indeed be usable for investment purposes—and in many cases, they likely are.

Payment with cryptocurrencies leads to… realization of capital gains!

Again, this seems entirely logical.

If one purchases a cryptocurrency for, say, €200, and later uses it to make a purchase worth €300, a capital gain of €100 is realized—subject to the new generalized capital gains tax.

After all, the world operates based on legal tender in the jurisdiction where one resides. If one uses US dollars to make a payment in Belgium, conceptually (“l’espace d’une seconde”), the transaction passes through the euro value of the dollar to settle a price or debt denominated in euros. A foreign exchange gain or loss is realized depending on the change in value since acquisition.

The same applies to cryptocurrencies. In other words, in the case of a value increase, one cannot avoid taxable capital gains by using the cryptocurrency directly for payment instead of converting it to euros. The gain must be declared, as the seller is likely not involved in the tax reporting process. Failure to declare constitutes deliberate tax evasion…

Determining the Amount of the Capital Gain

For crypto assets, one specific rule applies. Otherwise, the general rules are applicable, including the exclusion of “historical capital gains” by reference to the “snapshot value” on 31 December 2025.

The specific rule states that when crypto assets are acquired via an “airdrop”—where assets are distributed free of charge, often for promotional purposes—the acquisition value of the received crypto assets is equal to their value at the time they are granted to the taxpayer.

This rule, which is highly relevant for determining the taxable base in this admittedly very specific case, is only mentioned in the Explanatory Memorandum—not in the legislation itself.

Voilà.

I believe this provides a reasonable reference framework to resolve many questions regarding crypto and personal income tax.

Are there gaps? Let me know, and we’ll work toward answering any outstanding questions!