France’s National Assembly Finance Committee adopted amendment I-CF1826 on Oct. 7, introducing rules that would make exchanging cryptocurrencies like Bitcoin or Ether into e-money stablecoins like USDC a taxable event, even if investors never withdraw cash.
If enacted, the provision will take effect on Jan. 1, 2027, closing what sponsors describe as a tax deferral loophole on fiat-backed stablecoin conversions.
Ending Tax Deferrals for Stablecoin Swaps
Under current French tax authority guidance, crypto-to-crypto exchanges without cash balancing payments receive tax deferral, with taxable disposals triggered only when converting into fiat or acquiring goods and services. Amendment CF1826 removes this deferral when an investor receives e-money tokens as defined under the European Union’s Markets in Crypto-Assets (MiCA) regulation.
As regulators across Europe tighten digital asset oversight—a trend seen as the EU Council agrees to centralize oversight of major crypto firms under ESMA—France is directly targeting crypto-to-stablecoin risk management. Because Circle’s European white paper classifies native USDC as an e-money token under MiCA, swapping Bitcoin into USDC will trigger immediate gain recognition. The taxable swap will reset the cost basis of the received USDC to its consideration value, preventing further taxable gains if sold later at the same euro valuation.
Key Takeaways
- Taxable Swaps: Exchanging Bitcoin or Ether into e-money tokens like USDC becomes a reportable taxable event starting Jan. 1, 2027.
- New Basis Calculation: Replaces portfolio-wide ratio allocation with weighted-average acquisition value for the specific assets sold.
- Transition Rules: For pre-2027 holdings, investors must choose between actual acquisition cost or allocating their Dec. 31, 2026 total portfolio acquisition cost proportionally by asset value.
Revised Cost Basis Calculation and Transition Routes
The proposal alters how acquisition costs are calculated by moving away from France's portfolio-based ratio method toward a weighted-average acquisition value for the specific crypto-assets sold.
For assets acquired prior to 2027, investors face an irrevocable choice on their first tax return filed after Jan. 1, 2027:
- Actual Cost Route: Deduct verified historical acquisition costs for the sold asset.
- Allocation Route: Distribute the total portfolio acquisition price calculated under old rules as of Dec. 31, 2026 across holdings proportional to their values on that date.
Consider an investor holding €20,000 cost basis in Bitcoin (worth €60,000) and €40,000 cost basis in Ether (worth €40,000), totaling €60,000 cost on a €100,000 portfolio. Swapping that Bitcoin for €60,000 of native USDC under actual cost produces a €40,000 taxable gain (€60,000 minus €20,000). Under the allocation route, Bitcoin gets 60% of the €60,000 cost pool (€36,000 basis), lowering the initial gain to €24,000 while leaving €24,000 basis for Ether. If Bitcoin instead had a €50,000 historical cost and Ether €10,000, actual cost yields a €10,000 initial gain versus €24,000 under allocation.
Why It Matters
This legislative proposal fundamentally alters liquidity management for French crypto traders who rely on stablecoins to park capital during market downturns. By classifying stablecoin entry as a realization event, France eliminates tax-free de-risking, forcing investors to retain cash liquidity for tax liabilities even while keeping assets within digital wallets. Crypto investors with pre-2027 positions will need to carefully model their historical purchase basis before selecting their irrevocable tax allocation method.
