France’s tax proposal would tax Bitcoin-to-USDC swaps before investors cash out
France’s Finance Committee approved an amendment that would tax cryptocurrency conversions from Bitcoin into specific stablecoins like USDC as taxable disposals, eliminating prior tax deferrals even before investors cash out.
France’s proposed changes to cryptocurrency taxation would turn a conversion from Bitcoin or Ether into specific stablecoins into a taxable disposal, even if the investor never cashes out into traditional currency.
On Oct. 7, the National Assembly’s Finance Committee approved amendment I-CF1826, which introduces this exception to a broader revision of how private crypto gains are calculated. If enacted, the provision would apply to disposals and exchanges taking place on or after Jan. 1, 2027.
For an investor trading Bitcoin exposure for USDC, the outcome would alter the tax timing for risk-reduction trades. A capital gain could become reportable while the proceeds remain stored in an exchange account or crypto wallet. However, the legislation also modifies the cost basis deducted from those proceeds and offers a choice for transitioning older holdings.
Under current guidance from French tax authorities, crypto-to-crypto exchanges that do not involve a cash balancing payment are eligible for tax deferral. Converting assets into fiat currency, or using crypto to purchase goods and services, can already trigger taxation under the private-disposal regime, subject to standard exemptions.
Amendment CF1826 would eliminate the exchange deferral when an investor receives e-money tokens—or associated rights—as defined by the European Union’s Markets in Crypto-Assets (MiCA) regulation. The language specifically targets the asset received, meaning that swapping Bitcoin for a qualifying token can trigger the recognition of a gain ahead of any future cash withdrawal.
The legal scope of this exception relies on MiCA’s definition of a crypto-asset designed to maintain a stable value relative to a single official currency, invoking the standard without requiring an explicit issuer-licensing condition.
USDC serves as a practical example: Circle’s European white paper categorizes it as an e-money token under that exact MiCA provision. The scenarios below use native USDC, with all transactions calculated in euros.
Sponsors of the amendment defend the adjustment by labeling the deferral on fiat-backed stablecoin conversions a legislative loophole. For investors utilizing swaps to lower market exposure, the practical result is the earlier recognition of any accumulated gains.
The proposed tax calculation focuses on gains exceeding initial costs. It deducts the acquisition basis of the surrendered assets from the disposal price. Because this basis represents the recognized tax cost, any given transaction may result in a gain, a loss, or neither.
Two ways to value older holdings
France’s current portfolio-based calculation method assigns a portion of the entire crypto portfolio’s acquisition price to each taxable disposal. Existing guidelines deduct the total portfolio acquisition cost multiplied by the ratio of the disposal price to the portfolio’s total value immediately prior to the transaction.
The suggested alternative shifts focus strictly to the specific crypto-assets being disposed of. For identical assets acquired at varying prices, it mandates the use of a weighted-average acquisition value.
For assets acquired prior to 2027, the amendment presents two distinct paths. Investors can either use documented actual acquisition costs calculated under the new basis rules, or allocate the portfolio acquisition price determined by the old rules as of Dec. 31, 2026, across the assets held at that time based on their respective market values.
The allocation approach maintains a pool of acquisition costs and distributes them among holdings. The available cost pool remains grounded in the acquisition price calculated under previous regulations rather than the portfolio’s complete market valuation. The text specifies that once an investor files their first tax return reporting a taxable disposal after Jan. 1, 2027, this method becomes an irrevocable choice for the entire portfolio.
Imagine a hypothetical investor whose Bitcoin cost €20,000 and is valued at €60,000, while their Ether cost €40,000 and is valued at €40,000 as of the transition date. The portfolio holds €60,000 in total acquisition costs and has an overall value of €100,000. Assuming no prior disposals, fees, cash balancing payments, or other holdings of those tokens, and that euro values remain steady through the transactions:
Under the allocation strategy, Bitcoin accounts for 60% of the portfolio’s value and is assigned €36,000 in basis, leaving Ether with the remaining €24,000. Conversely, using actual costs would set their respective bases at €20,000 and €40,000.
Consequently, the same Bitcoin-to-USDC transaction would yield different initial disposal gains depending on the chosen route:
| Hypothetical transaction or basis | Proposed actual-cost route | Proposed allocation route |
|---|---|---|
| Bitcoin basis before the swap | €20,000 | €36,000 |
| Gain on swap into €60,000 of native USDC | €40,000 | €24,000 |
| Basis of the USDC received | €60,000 | €60,000 |
| Gain on later Ether disposal for €40,000 | €0 | €16,000 |
The table outlines the contrast in hypothetical gross gains under the proposed framework. While current rules grant deferral to qualifying swaps, both transition routes would turn a Bitcoin-to-USDC swap into a taxable event.
Modifying historical costs to €50,000 for Bitcoin and €10,000 for Ether flips the initial disposal comparison: actual cost results in a €10,000 Bitcoin gain compared to €24,000 under the allocation method. Assuming unchanged values, the subsequent Ether gain would register at €30,000 using actual cost and €16,000 using allocation. Historical costs ultimately dictate which approach recognizes larger gains first.
Basis resets and the cost of loss timing
The proposal explicitly differentiates between exchanges that maintain deferral eligibility and those that become taxable. Deferred exchanges carry the original basis of the surrendered assets over to the newly acquired assets. Taxable exchanges assign the received crypto-assets a basis derived from the consideration value already utilized to compute the gain, adjusted for any cash balancing payments.
For the Bitcoin-to-USDC swap in the initial scenario, the reset rule assigns the incoming USDC a €60,000 basis under either transition route. Selling that USDC later for that same €60,000 amount would generate no additional gain, preventing duplicate recognition of the original Bitcoin gain once the proceeds—assuming stable values—finally hit a bank account.
Because USDC is pegged to the dollar, the assumption of stable euro values is critical. Any later disposal occurring at a different euro value would necessitate an independent gain or loss calculation.
If the investor additionally sold the remaining Ether for €40,000, the first example would total €40,000 in realized aggregate gains under either proposed transition path. The actual cost method recognizes the entirety of this gain within Bitcoin, whereas the allocation method divides it between Bitcoin and Ether.
The amendment modifies swap exceptions and basis guidelines without altering existing restrictions on crypto losses. Tax authorities dictate that crypto gains and losses offset one another within the exact same tax year, but net crypto losses cannot be carried forward into future years nor applied against gains from other asset classes.
A separate hypothetical illustrates the impact of recognizing losses and gains across different years. Under the proposed actual-basis framework, a single Bitcoin holding bought for €30,000 and converted into €20,000 of native USDC would log a €10,000 loss, with the USDC taking on a €20,000 basis.
If that USDC were subsequently swapped back into Bitcoin without a cash balancing payment, the transaction would retain its deferral status since Bitcoin falls outside the e-money token exception. It would transfer the €20,000 basis back to Bitcoin. A later taxable sale of that Bitcoin for €30,000 would record a €10,000 gain, assuming zero fees, token pools, cash adjustments, or other gains and losses.
These amounts could effectively offset if realized during the same tax year. However, if the net loss occurs in one year and the gain materializes in a subsequent year, the prior loss cannot shelter the later gain under current rules. Recognizing these events in different years can therefore alter the ultimate tax outcome, even when transaction flows bring the holding right back to its initial value.
The corresponding reporting trade-offs follow this same mechanism. Asset-specific baselines would eliminate the portfolio-wide allocation formula for upcoming disposals, but investors would be required to maintain meticulous records of acquisition proof, weighted averages, and bases carried or reset through swaps. For older holdings, the proposed allocation method would also demand a valuation as of Dec. 31 alongside an irrevocable whole-portfolio decision.
The next legislative milestone approaches as the 2027 budget dossier, reviewed on Oct. 12, heads to the National Assembly for plenary debate on Oct. 13.
Frequently Asked Questions
01What does France’s proposed tax change mean for crypto investors?
The proposal would classify certain cryptocurrency swaps—specifically moving from Bitcoin or Ether into stablecoins like USDC—as taxable disposals, requiring investors to report gains even if they do not convert their holdings into cash.
02When would these new tax rules take effect?
If enacted, the provisions would apply to disposals and exchanges taking place on or after January 1, 2027.
03Can crypto losses offset crypto gains under French tax law?
Yes, crypto gains and losses can offset each other within the same tax year, but net crypto losses cannot be carried forward into future years or used to offset gains from other asset classes.
