France’s 31.4% Stablecoin Tax Could Spark EU Exodus to Paxos and Tether
France’s new proposal to tax conversions into MiCA-regulated stablecoins like USDC and EURC at a flat 31.4% rate—even without converting to euros—risks pushing traders toward unregulated alternatives. The catch is that USDT, the world’s largest stablecoin, is explicitly excluded from the tax, creating a regulatory arbitrage opportunity that could reshape DeFi liquidity flows across Europe.
The mechanics here are simple: under current rules, French investors only pay capital gains tax when they convert stablecoins to euros or spend them. The amendment, led by Nicolas Sansu and sixteen deputies, flips this by taxing the moment they exchange cryptocurrencies for MiCA-compliant stablecoins—USDC, EURC, and others—starting January 1, 2027. But USDT, which operates outside MiCA’s scope, remains untouched. On closer reading, this isn’t just a tax on stablecoins; it’s a tax on compliance.
Follow the money, and the numbers tell a clear story. France reported $9.4 billion in taxable onchain crypto activity in 2025, with $2.5 billion in gains—figures that could shrink if traders migrate offshore. Chainalysis data shows how regulatory shifts redirect liquidity: EURC trading volumes in Europe surged 2,727% between July 2024 and June 2025, compared to just 86% for USDC. The implication is stark: when one stablecoin becomes expensive, traders don’t just switch coins—they switch jurisdictions.
The Loophole That Could Undermine the Tax
The tax’s uneven application is its fatal flaw. MiCA’s framework covers stablecoins issued by regulated entities like Paxos (USDC) and Binance (EURC), but not those like USDT, which Tether operates without EU oversight. This creates a direct incentive for traders to bypass the tax by using USDT or other unregulated stablecoins. François Volpoet, Chainalysis’ regional sales director for France, warns the measure could push activity into “unmonitored DeFi and offshore exchanges,” undermining France’s push for compliance.
The proposal also introduces a €100,000 ($116,000) threshold for declaring self-hosted crypto wallets, with fines up to $11,600 for non-compliance. But the real tax avoidance play lies in the stablecoin choice. An investor converting 10,000 euros of bitcoin into USDC would owe 31.4% on gains—around 1,256 euros—whereas the same trade into USDT would face no tax at all. The result? A race to the bottom where compliance becomes a cost, not a default.
Paxos and Tether, the issuers of USDC and USDT respectively, stand to benefit directly. While Paxos has invested in MiCA compliance, Tether has long operated in a regulatory gray area. The tax’s exclusion of USDT doesn’t just favor Tether—it rewards any stablecoin issuer willing to forgo EU oversight. The catch is that this isn’t just about tax avoidance; it’s about liquidity. If French traders flee to USDT, they take their trading volume—and their capital—with them.
Where Will the Money Go?
The likely destinations for tax-avoiding traders are jurisdictions with lighter regulation and stronger stablecoin adoption. Dubai, for instance, has aggressively courted crypto firms with its VARA-regulated sandbox, while Switzerland’s FINMA has taken a hands-off approach to stablecoins, allowing them to operate with minimal restrictions.
The risk for France isn’t just capital flight—it’s the fragmentation of Europe’s crypto market. If traders migrate to offshore platforms, they bypass not only taxes but also the EU’s anti-money laundering (AML) and know-your-customer (KYC) rules. Chainalysis estimates that unregulated DeFi and peer-to-peer trading could see a surge in activity, making it harder for authorities to track flows. The irony? France’s attempt to bring more crypto transactions into the regulated system could push them into the shadows.
On the ground, the proposal still faces hurdles. The amendment must pass further parliamentary stages before becoming law, with a final vote due by December 10, 2026. But the writing is on the wall: if enacted, France could accelerate a broader EU-wide fragmentation, where traders favor jurisdictions with lower taxes and fewer restrictions. The question isn’t whether this will happen—it’s how quickly.
The Bigger Picture: A Test for MiCA
France’s stablecoin tax is more than a domestic policy—it’s a test for MiCA’s effectiveness. The EU’s Markets in Crypto-Assets regulation was designed to bring stablecoins into the fold, but its success depends on uniform enforcement. If France’s tax drives traders to unregulated alternatives, it could weaken MiCA’s credibility across the bloc. Other EU members may follow suit, creating a patchwork of rules that benefits no one but stablecoin issuers willing to operate outside the system.
The history of crypto regulation offers a cautionary tale. In 2018, South Korea’s crackdown on exchanges led to a mass exodus of traders to Japan and overseas platforms. The result? A temporary drop in compliance but a long-term erosion of trust in local markets. France risks repeating this mistake—only this time, the alternative isn’t just Japan but a global network of offshore exchanges and DeFi protocols.
The mechanics here are clear: tax MiCA-compliant stablecoins, and traders will flee to those that aren’t. The catch is that this isn’t just about tax avoidance—it’s about liquidity, privacy, and the fundamental question of where capital wants to go. For now, the money is moving toward USDT and offshore platforms. The only question left is whether France will let it stay there.
How the Tax Could Favor Tether Over MiCA-Compliant Issuers
The proposed tax explicitly excludes USDT, the stablecoin issued by Tether, while targeting MiCA-regulated alternatives like USDC and EURC. This creates a direct incentive for French traders to shift activity toward USDT to avoid the 31.4% levy on conversions. Since USDT operates outside the EU’s MiCA framework, it remains untaxed under the amendment, even as compliant stablecoins face immediate taxation upon exchange.
Chainalysis data cited in the source material shows EURC trading volumes in Europe surged 2,727% between July 2024 and June 2025, compared to just 86% for USDC, illustrating how regulatory shifts can rapidly redirect liquidity. The same dynamic could now favor USDT, which is not subject to MiCA rules and thus not covered by the French tax proposal.
As a result, traders seeking to minimize tax exposure may prefer USDT over USDC or EURC, despite the latter’s compliance with EU standards. This outcome could inadvertently advantage issuers willing to forgo EU oversight, undermining the policy’s goal of promoting regulated stablecoin use within the bloc.
Sources
- Crypto: A 31.4% tax on stablecoins approaches in France
- Cryptocurrency bubble
- France's 31.4% stablecoin tax proposal risks driving crypto activity offshore, warns Chainalysis
Photo: Vitalii Abakumov / Unsplash (Unsplash License)
