Czech Republic president Petr Pavel has signed a bill that exempts Bitcoin and other digital assets from capital gains tax after three years. According to a local news report, the move now removes some of the tax challenges facing crypto holders in the country.

The presidential assent is not surprising, given that the country’s parliament has already shown strong support for the tax amendments, which they believe will benefit the crypto industry.

According to the new law, holders of crypto assets who sell after three years of holding will not have to pay capital gains on their profits. Beyond that, there are also tax exemptions for crypto transactions up to CZK 100,000 (around $4,136).

However, there are other conditions for the exemption to apply, including the requirement that crypto assets not have been part of business assets. The law is similar to what the country already has in place for other traditional assets, including securities.

These provisions are all part of the Digitalization of Financial Markets Act, which addresses the domestic application of several European Union (EU) laws, including the Market in Crypto Assets (MiCA) regulations.

Czech authorities have focused on balancing the regulation and enabling of digital assets in the country. Many in the crypto industry, including Kraken Exchange, consider this a positive sign, noting that it further encourages holding crypto.

Nevertheless, the positive news has not had much impact on the crypto market. Bitcoin is down 1% to $96,000, while other assets have also seen sizable declines in the past 24 hours.

Czech shows strong pro-crypto sentiment

Meanwhile, the tax exemption is the latest sign of how the Czech Republic embraces digital assets. Following recent moves, the country could become the first to officially have BTC in its central bank reserve.

A few days ago, the board of Czech National Bank (CNB)  approved a proposal by CNB Governor Ales Michl on the possibility of adding Bitcoin to the central bank reserves. Michl proposed the adoption of Bitcoin to diversify the country’s 140 billion portfolio.

With the board now approving the proposal, the CNB will study Bitcoin and its potential as another asset class for the bank portfolio before deciding on whether to approve it. It is still too early to determine what will happen, but if the country decides to adopt Bitcoin, it could add up to 5% of its reserve to BTC within a decade.

However, that idea does not enjoy universal support. Several stakeholders within the country, including Finance Minister Zbynek Stanjura, do not support it, citing volatility. European Central Bank (ECB) president Christine Lagarde has also said that BTC cannot be a reserve asset for central banks, citing liquidity and regulatory issues.

Despite this pushback, the ECB will not be able to stop the Czech Republic if it chooses to proceed with the plan. Although the Czech Republic is part of the EU, it is not within the Eurozone, which refers to the 20 countries in the EU that have adopted Euros as their currency.

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