On January 22, 2026, Dutch Parliament's lower house voted to pass the controversial Box 3 asset tax reform, which unifies stocks, bonds, and crypto assets under the annual tax scope of "actual capital gains." More critically, starting from 2028, unrealized gains will also be subject to taxation, fundamentally diverging from the traditional logic of "taxing only upon sale." After a court previously ruled that the old Box 3 system was illegal and caused damage to the tax base, the government hopes to fill an annual fiscal gap of about 2.3 billion euros with a new scheme at an approximate 36% tax rate. However, for investors, the contradiction of having to pay taxes on paper gains while cash flow has not yet materialized is rapidly amplifying into a policy controversy surrounding liquidity pressure, prompting global crypto investors to reassess their allocation and layout strategies.

Old System Ruled Illegal, New Tax as Fiscal Stopgap

● Judicial Impact: The old Box 3 system taxed based on "assumed yield" rather than actual gains, which taxpayers seriously questioned as being disconnected from market reality, ultimately leading to a court ruling it illegal. This judgment not only undermined the government's legitimacy in wealth taxation but also directly exposed the tax base gap, forcing the finance department to quickly seek new revenue pillars to maintain the sustainability of existing welfare and budget arrangements.

● Political Reality: Under the pressure of an annual fiscal gap of about 2.3 billion euros, the majority of parties in the second chamber of Parliament chose to support the new Box 3 reform, incorporating actual capital gains—including stocks, bonds, and crypto assets—into the annual tax scope. For both the ruling and mainstream opposition forces, this proposal is a passive response to the court ruling and a "stopgap measure" to avoid further financial bleeding, prioritizing political feasibility over technical perfection.

● Get on the Bus First, Pay Later: Several lawmakers publicly acknowledged that taxing unrealized gains has significant theoretical and practical flaws, especially the asymmetrical impact on liquidity and risk-bearing, which has already sparked controversy. However, caught between the declaration of the old system as illegal and the delayed details of the new system, they chose to "pass it first, then amend," using an immature law to backstop fiscal and institutional credibility.

Taxing Unrealized Gains: The Invisible Stranglehold of Liquidity Pressure

● Conceptual Misalignment: Taxing unrealized gains means that as long as the market value of assets exceeds the benchmark within the year, regardless of whether they are sold, tax authorities consider it as "making money" and require payment of capital gains tax. For stocks or crypto assets, paper gains are merely numerical changes due to price fluctuations, not converted into cash flow, yet taxes must be paid in advance for this "paper profit," breaking the traditional intuitive logic of "gains = realization."

● Double Whammy in Down Markets: In years of significant price drops or prolonged stagnation, the issue is magnified—previously accumulated paper gains have already been taxed, and if prices retract or plummet, investors may face a situation where "taxes have been paid, but money has been lost." If tax obligations coincide with asset price declines, holders unable to free up enough cash may be forced to sell assets to meet tax bills, creating a self-reinforcing vicious cycle of price drops and selling pressure.

● Systemic Amplifier for High-Volatility Assets: In the more volatile crypto asset market, the tax base swings dramatically with market value, making the taxation of unrealized gains more likely to create extreme pressure during bull-bear transitions. At the end of a bull market, paper gains inflate nominal tax burdens, while at the beginning of a bear market, price retractions and the psychological shadow of historical tax burdens may trigger concentrated selling and a sharp contraction in risk appetite, posing a systemic shock to already fragile liquidity and market stability.

A Crossroads for Dutch Retail and Crypto Investors

● Real Choices at the Account Level: For local Dutch retail and on-chain investors, the new system directly impacts micro-decisions regarding holding periods, asset allocation, and selling timing. Long-term holders may be forced to pay more attention to annual valuation points rather than the fundamentals of the projects themselves; short-term traders must weigh frequent portfolio changes against tax record costs, with strategies originally focused on "long-term holding" or "high-frequency trading" facing pressure to recalibrate.

● Geographic and Structural Migration: Some high-net-worth or highly active investors may begin to assess the costs and benefits of relocating to low-tax jurisdictions or restructuring asset ownership through offshore accounts, foreign custody, and trust structures to mitigate the direct impact of domestic Box 3 rules. Although these arrangements have legal and compliance boundaries, in an environment where tax burdens are expected to rise significantly, cross-border migration and structural planning are likely to become foreseeable behavioral responses.

● Dilemma for Compliant Investors: For investors choosing to stay in the Netherlands and strictly adhere to reporting obligations, the core issue is no longer "whether to participate in crypto," but "how much tax risk can be tolerated in high-volatility assets." They need to recalculate after-tax returns and liquidity buffers between fulfilling local tax obligations and pursuing high volatility and high returns, as many returns that once seemed reasonable may no longer be attractive after deducting an approximate 36% nominal tax rate and considering price retractions.

From the Netherlands to Europe: A Testing Ground for Unrealized Gains

● Significance of the Reform Sample: Without exaggerating its impact, the Netherlands' move to tax unrealized gains is likely to be seen by other European countries as a "real-world testing ground" for wealth and capital tax reforms. On one hand, it responds to the judicial ruling against the old system; on the other hand, it demonstrates how governments attempt to redefine the tax base in the digital asset era, treating traditional and new assets equally in the tax scope.

● Imitation Impulse in High-Tax Countries: For European countries already under pressure from high welfare and spending, the Dutch proposal offers a reference path—especially regarding how to classify crypto assets for tax purposes and how to tax based on actual gains. Even if countries do not simply replicate the most controversial aspect of "unrealized gains," more detailed classifications and tax frameworks around crypto assets are likely to be proposed and tentatively implemented in the coming years.

● Planning Challenges for Global Investors: Once more jurisdictions begin to adjust their tax approaches to crypto assets, multinational investors will have to face rapidly rising tax planning costs and institutional uncertainties. The same on-chain asset may yield vastly different tax burdens under different national residency statuses and reporting obligations, eroding the advantages of global allocation with increased compliance costs and information asymmetries.

Tax System Design in Limbo: Technical Details Will Determine Who Pays

● Key Parameters Still a Black Box: Many technical details regarding the new Box 3 system have yet to be finalized by officials, including specific tax calculation criteria, annual valuation points, and whether the approach of "the difference between the beginning and end of the year’s market value plus current year income" will be used to calculate actual gains. Relevant statements are still in the verification stage, and any interpretation treating them as established facts will overestimate policy certainty and may mislead investor decisions.

● High Uncertainty of Non-Resident Rules: There is a clear lack of public information regarding whether the assets of foreign nationals and non-tax residents will be included in the new system, how they will be included, and what timeline will apply. For crypto practitioners and investors operating in multiple jurisdictions, this gap makes compliance pathways in the coming years highly variable, and we must deliberately avoid giving overly affirmative or operational hints in our interpretations to prevent treating unformed policy expectations as executable rules.

● Distinct Situations for Different Participants: Once specific rules are implemented, technical details will profoundly reshape the actual tax burdens of different types of participants. For example, high-frequency traders may face complex position tracking and frequent valuations, with reporting costs and tax risks far exceeding simple "gains × tax rate"; while long-term holders will need to assess how annual valuations amplify the impact of mid-term fluctuations on tax bills. More complex is how investors participating in DeFi protocols, staking, or liquidity mining define the nature of gains and valuation points, which remains unresolved; these differences will ultimately determine who bears a heavier burden under the new system.

Survival and Game Theory Under the New Normal of Crypto Taxation

The core signal released by the Dutch Box 3 reform is that in the digital asset era, states are re-competing for the tax base, and crypto assets are no longer in a gray area of regulation and taxation but are included in a tax framework that is as strict, if not more sensitive, than that for traditional financial assets. For investors, merely focusing on price fluctuations is no longer sufficient; after-tax returns, compliance costs, and cross-border risks are becoming key variables that must be assessed in tandem. A new decision-making paradigm surrounding the "tax—returns—liquidity" triangle is forming. In the coming years, the Dutch proposal may be amended, weakened, or even replaced by more operational models, or it may be partially absorbed and localized by other countries. However, it is foreseeable that the game between the crypto industry and tax authorities regarding "how to define gains" and "who bears the risk" will not end with the passage of a single bill but will continue in a more complex and technical manner for the long term.

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