Unrealized Gains Tax on Crypto: The New 36% Law Explained (What HODLers Must Know)

The Netherlands has officially passed the controversial "Actual Return in Box 3 Act," establishing a precedent that could reshape the global landscape of asset taxation. Approved by the House of Representatives on February 13, 2026, the legislation introduces a flat 36% tax on unrealized gains for liquid assets, including cryptocurrency, stocks, and bonds. Set to take full effect on January 1, 2028, the law compels investors to pay taxes on "paper profits" regardless of whether they have sold their assets, raising urgent concerns regarding liquidity crises and capital flight.

Key Takeaways

• 36% Tax on Unrealized Gains: Starting January 1, 2028, Dutch residents must pay tax on the annual appreciation of liquid assets, even if those assets have not been sold.
• Unequal Asset Treatment: While crypto and stocks face annual taxation on growth, real estate and startup shares remain exempt until realized, creating a distinct regulatory double standard.
• Strict Exit Barriers: The law includes a "protective assessment," effectively functioning as an exit tax to prevent investors from emigrating to avoid the levy.
• Global Revenue Trend: The move addresses a €2.3 billion national revenue deficit but signals a potential shift in how indebted governments worldwide may target wealth accumulation.

The "Actual Return" Legislation Explained

The passage of the "Actual Return in Box 3 Act" marks a significant pivot in fiscal policy. Passed with a comfortable majority of 93 votes, the legislation was designed to plug a €2.3 billion annual revenue hole created after the Dutch Supreme Court ruled the previous tax system illegal. Lawmakers framed the bill as a necessary "bridge solution," though financial analysts view it as a structural overhaul of wealth preservation.

Under the new regime, the definition of "actual return" for specific asset classes includes capital growth. Consequently, if a cryptocurrency portfolio appreciates in value during the fiscal year, the owner incurs a tax liability on that growth immediately.

Crucially, the law creates a bifurcation between liquid and illiquid assets. Real estate and shares in startups are explicitly exempt from the unrealized gains tax, with levies applied only upon sale. This structure has drawn sharp criticism for punishing liquidity and digital innovation while favoring traditional brick-and-mortar investments.

"It’s a clear double standard that punishes liquid assets and innovation... The government treats that paper gain as income."

The Liquidity Death Spiral

The primary criticism of the law centers on the mechanics of payment. Investors holding high-growth assets like Bitcoin may face substantial tax bills without having the corresponding cash on hand. To settle the 36% tax on paper gains, investors would be forced to sell a portion of their holdings.

Market analysts warn of a potential "liquidity death spiral." If millions of investors are simultaneously forced to liquidate assets to meet tax obligations, the resulting sell pressure could depress market prices, reducing liquidity and triggering a feedback loop where the tax itself catalyzes a market crash.

The Volatility Risk

The danger is amplified by the inherent volatility of cryptocurrency. The tax liability is calculated based on a snapshot of value, typically taken at the end of the fiscal year.

Consider a scenario where an investor holds Bitcoin valued at $150,000 on December 31. They incur a tax liability based on that valuation. If the market corrects sharply in January—dropping the asset's value to $60,000—the investor remains liable for taxes on the higher, evaporated value. In extreme cases, the tax bill could exceed the current value of the portfolio, a situation described by experts as "mathematically ruinous."

Global Implications and Capital Flight

While this legislation is specific to the Netherlands, financial experts warn that it may serve as a testing ground for other nations grappling with record-high debt. Global debt levels hovered near $346 trillion in late 2025, prompting governments to seek new revenue streams.

Similar proposals have surfaced elsewhere, including the Biden administration's 2025 budget proposal for a minimum tax on unrealized gains for high-net-worth individuals and state-level proposals in California and Illinois. The Dutch implementation is the first to move from theory to law.

However, history suggests such policies may trigger capital flight. Following the passage of the act, analysts are observing a migration of capital to jurisdictions with more favorable tax environments, such as the UAE, which boasts zero personal income and capital gains tax, and El Salvador. Additionally, there has been a noted increase in the valuation of privacy-focused cryptocurrencies like Monero, suggesting a shift toward "shadow markets" to evade regulatory visibility.

To mitigate this, the Dutch law includes a "protective assessment" (conserv) for emigrating residents. This mechanism calculates the tax on unrealized gains the moment a resident attempts to leave the country, creating a debt obligation that hangs over the individual indefinitely.

"The lesson is clear. Wealth is mobile. If you try to tax it before it's realized, it leaves."

As the 2028 implementation date approaches, investors are expected to fundamentally alter their strategies, moving away from long-term holding ("HODLing") toward more active trading or relocation. While the new coalition government has hinted at attempts to reverse or modify the law, the current legislative reality presents an existential challenge to digital asset ownership in the Netherlands.