Crypto-to-crypto swaps: when the exchange is taxable (and why the regulation creates confusion)

One of the most controversial aspects of cryptocurrency taxation in Italy concerns the exchanges between crypto-assets, known as crypto-to-crypto swaps. Introduced with the 2023 Budget Law, the regulation was supposed to simplify the tax treatment of these operations, but in practice, it has generated further uncertainty.

During the live session on Instagram, Stefano Capaccioli described this provision as one of the most ambiguous in the entire regulatory framework.

What the Regulation Says About Swaps

The law stipulates that exchanges between crypto-assets are not fiscally relevant when they involve assets “having the same characteristics and functions.” In these cases, the swap does not generate taxable capital gains.

The issue arises precisely from this wording: the law does not concretely define what the “same characteristics and functions” are.

An Impossible Concept to Define

In the crypto world, seemingly similar assets can have radically different functions. Governance tokens, utility tokens, stablecoins, native cryptocurrencies, and wrapped assets share some technical characteristics, but they adhere to different economic and functional logics.

According to Capaccioli, attempting to rigidly classify these differences is unrealistic. The result is that every crypto-to-crypto transaction can potentially become subject to tax interpretation, exposing the taxpayer to significant risks.

Bitcoin, stablecoins, and trading bots

A typical example concerns the exchange between Bitcoin and stablecoins. In theory, since these are assets with different functions, the swap could generate a taxable capital gain. However, in practice, many traders execute thousands of transactions per month through automated trading bots.

Capaccioli highlighted the absurdity of having to consider every single transaction as a taxable event. Managing the tax implications of tens of thousands of monthly trades is, in fact, impractical, especially if an analytical reconstruction of each transaction is required.

The Issue of “Taxable Events”

One of the central issues is precisely the number of taxable events. The more the regulation delves into the specifics of individual crypto-to-crypto transactions, the greater the administrative burden for taxpayers and professionals.

This approach risks producing the opposite effect of what is desired: instead of encouraging compliance, it pushes many users towards non-compliance or drastic solutions, such as relocating abroad.

The Need for Simplification

According to Capaccioli, the solution is not to multiply the rules, but to drastically reduce the instances where a swap triggers tax liability. Limiting taxation to the moments of actual conversion into fiat currency would make the system more fair, understandable, and manageable.

In the absence of a structural revision, the taxation of crypto-to-crypto swaps will remain one of the main points of friction between taxpayers and the financial administration.