France Backs Stablecoin Tax Plan and 10-Year Window for Crypto Loss Relief

French regulators have passed revisions that will levy taxes on the conversion of cryptocurrencies into stablecoins and permit traders to carry forward losses for 10 years under the nation's proposed 2027 budget. As per the National Assembly of France, the amendments for levying tax on stablecoins were accepted by the Finance Committee on October 7. There was also another amendment for modifying the manner in which losses incurred through trading of digital assets could be claimed against future gains. Both proposals remain at the committee stage and must pass further legislative review before becoming law.

Proposed Rules Would End Tax Exemption for Qualifying Stablecoin Conversions

Other crypto taxation changes that have been proposed by lawmakers include an exit tax that applies to rich taxpayers shifting their place of taxation to somewhere outside France. With amendment I-CF1826 that was put forward by lawmaker Nicolas Sansu, transactions where the taxpayer converts his crypto assets into qualified electronic money token assets will be treated as taxable from January 1, 2027. Under current French law, there is no taxable event when a taxpayer exchanges his crypto assets for other crypto assets.

The same applies to the conversion of Bitcoin or Ethereum to a qualifying stablecoin, even if it is pegged to a conventional currency like the US dollar or euro. Sansu's plan will do away with the exemption from taxation for transactions in which investors receive electronic money tokens as per the Markets in Crypto-Assets (MiCA) Regulation of the European Union (EU).

The explanatory note to the amendment stated that it was possible under the current law for investors to exchange appreciated cryptos for stablecoins without having to pay taxes, as would be applicable in case of direct sale of the assets for cash.

It is mentioned that stablecoins may be used for payment or buying of other cryptocurrencies, even though stablecoins are treated as digital assets under the current tax system. This proposal means that gains or losses arising from such transactions should be calculated based on the difference between the disposal price and the acquisition price of the asset sold.

Transaction costs recorded in documentation were allowable deductions for establishing the disposal price. There were two possible ways of identifying the cost of acquisition of any cryptocurrency acquired prior to the year 2027. One way was through the documented cost of each particular investment, or the other was through allocating the cost of acquisition of the entire portfolio on December 31, 2026.

While discussing the stablecoin, the committee voted in favor of amendment I-CF798, introduced by Daniel Labaronne, in regard to how cryptocurrency losses are handled. The amendment proposes that qualifying losses from disposing of cryptocurrencies be carried forward for a period of ten years to be deducted from gains earned in that period. Losses realised from private crypto transactions that qualify as gains will offset gains generated in the tax year when the losses were incurred. However, the unused losses cannot be used to offset future gains.