According to CoinDesk, recent reports indicate that Eric Trump has suggested a potential tax policy shift under President Donald Trump’s new administration, which could exempt U.S.-based cryptocurrencies from capital gains tax while imposing a 30% tax on non-U.S. digital assets. If enacted, this policy could trigger major market shifts, impact investor behavior, and reshape the global cryptocurrency landscape.

Potential Market Instability and U.S. Investor Behavior

The proposed tax exemption could incentivize American investors to liquidate non-U.S. crypto holdings, despite the 30% tax penalty, and redirect funds into domestic cryptocurrencies to maximize tax-free returns. Such a shift could intensify selling pressure on globally distributed projects, particularly those heavily dependent on U.S. investment.

Moreover, without a robust regulatory framework, the policy could encourage an influx of new crypto projects within the U.S., reminiscent of the 2017 ICO boom, which saw an influx of fraudulent and unsustainable projects. If history repeats itself, market chaos and investor losses could follow, deterring institutional participation and long-term capital inflows.

Impact on Global Investment and Crypto Ecosystem

Beyond domestic implications, the tax policy could redirect venture capital funding away from emerging markets as U.S. investors prioritize tax-free returns. Countries reliant on crypto-driven financial inclusion could face reduced funding and liquidity, leading to stifled innovation and development abroad.

Furthermore, crypto firms that previously moved offshore due to regulatory uncertainty may return to the U.S., concentrating capital and talent domestically. While this might strengthen the U.S. blockchain industry, it could also create an imbalanced ecosystem, limiting international collaboration.

A Fragmented and Over-Saturated Crypto Market?

If other countries respond by introducing similar tax exemptions for locally created cryptocurrencies, the market could become oversaturated with new tokens, leading to reduced liquidity and fragmented trading. While nations like the UAE and Cayman Islands already offer zero capital gains tax on crypto, they apply it universally, unlike the U.S. proposal, which favors domestic tokens over foreign projects.

This skewed tax structure could encourage the artificial creation of U.S.-based tokens, isolating American investors from the global crypto economy and weakening the sector’s credibility. Over time, this could hinder competition, disrupt global adoption, and create regulatory conflicts between major economies.

A Double-Edged Sword for Crypto Innovation

While a capital gains tax exemption for U.S. crypto assets might boost domestic innovation and investment, it also introduces risks of market instability, regulatory uncertainty, and global economic fragmentation. Without clear guardrails and international cooperation, the long-term consequences of this policy shift could undermine the broader cryptocurrency industry, affecting both investors and blockchain developers worldwide.