More Tax Payments via Cryptocurrency are Coming

Colorado is to become the latest state to accept crypticurrency for tax payments now, taking up the mantle.

During a February 2022 interview, Governor Jared Polis told CoinDesk that “Colorado will start accepting cryptocurrencies for tax and other payments to the state by the end of the summer.”

When asked how that would work, Polis said Colorado is looking for crypto companies to act as a transactional intermediary, to accept and convert cryptocurrency payments on behalf of the state. “Our budget is still in dollars. Our expenditures are still in dollars. And of course, we don’t want to take the speculative risk of holding crypto.” Payments would enter the state’s system as dollars, “but for consumer convenience we want to accept payment in a wide variety of cryptocurrencies just as we do in credit cards.” He also noted that “the transaction cost is a lot less for crypto” than it is for credit cards.

I could find nothing about this on the Colorado Department of Revenue website, but according to Governor Polis, Colorado will start by accepting bitcoin and other cryptocurrencies for tax payments sometime during the summer of 2022. A few months after that, Colorado will accept cryptocurrencies for other transactions, such as payment for driver’s licenses and fishing licenses.

This is just one way Colorado is putting itself “at the center of the crypto economy,” said Polis. In 2019, the city of Denver used blockchain technology to facilitate voting for residents overseas. Colorado has its very own Blockchain Solution Architect. There’s even a project to “move the state’s cattle-brand system onto the blockchain,” though that seems a bit oxymoronic.

Though Colorado may be leading this charge, it isn’t acting in isolation. California Senate Bill 1275 would allow state agencies to accept cryptocurrencies as a method of payment for the provision of government services. Arizona and New York are among the states seeking to allow state agencies to accept cryptocurrency as payment for fines, penalties, taxes, and more. Hawaii and Massachusetts are two of the states looking to establish a blockchain and cryptocurrency task force.

Miami, Florida, brought “the first CityCoin to market,” and Miami Mayor Francis Suarez intends to be “the first city in America to give a bitcoin yield as a dividend directly to its residents.” Across the country, a Wyoming-based crypto bank based is working to secure a master account with the U.S. Federal Reserve.

And on March 9, 2022, President Biden signed an executive order “on ensuring responsible development of digital assets” that lays out the following objectives:

• Protect consumers, investors, and businesses in the United States
• Protect U.S. and global financial stability and mitigate risk
• Mitigate illicit finance and national security risks posed by misuse of digital assets
• Reinforce U.S. leadership in the responsible development of payment innovations and digital assets
• Promote equitable access to safe and affordable financial services
• Support technological advances that promote responsible development and use of digital assets
• Explore a U.S. Central Bank Digital Currency (CBDC)

A White House Fact Sheet on the executive order explains: “The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate.”

It may still seem like Monopoly money to some of us, but cryptocurrency is real. So is the metaverse, which is starting to get the attention of tax authorities.