- Congressman introduces a bill for the IRS to accept Bitcoin.
- The case of El Salvador inspired the move.
- Republicans are increasingly becoming pro-crypto.
Paying taxes in Bitcoin could soon become a reality. Inspired by El Salvador’s embrace of Bitcoin, a US congressman proposed a bill to allow taxpayers to pay their federal taxes in the crypto.
However, despite similar experiments in several US states, integrating Bitcoin into the US tax system would present significant challenges.
New Bill Proposes IRS to Accept Bitcoin for Tax Payments
On Tuesday, June 25, Rep. Gaetz introduced a bill to enable federal income taxes to be paid with Bitcoin. The proposed legislation mandates the U.S. Secretary of the Treasury to develop and implement a method for accepting Bitcoin payments.
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Gaetz emphasizes that this bill aims to modernize the U.S. tax system, promote innovation, and increase efficiency. “By enabling taxpayers to use Bitcoin for federal tax payments, we can promote innovation, increase efficiency, and offer more flexibility to American citizens,” Gaetz told The Daily Wire.
Among other provisions, the bill outlines that Bitcoin received for tax payments must be converted immediately to U.S. dollars to mitigate volatility risks. The bill is also not without precedent. Several U.S. states, including Colorado, New Jersey, Kentucky, and Utah have begun implementing their own regulations around crypto tax payments.
Is Paying Taxes in Crypto Viable?
Despite some experiments in other states and countries, enabling crypto tax payments will face technical, and legislative challenges. For one, tax authorities will have to find a way to convert Bitcoin into fiat currency instantly, to avoid volatility.
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A more difficult technical issue is securing taxpayers’ privacy. As all Bitcoin transactions appear on the Bitcoin blockchain, they introduce privacy risks. Malicious actors may be able to track the transactions and reveal sensitive information about individual taxpayers.
At the same time, the Bitcoin experiment in El Salvador showed mixed results. Introduced in 2021, the Bitcoin Law enabled persons and businesses to settle accounts in Bitcoin and use it to pay taxes and bank loans. However, the actual use of the cryptocurrency is far from ubiquitous. For instance, a study revealed that only 12% of Salvadoreans used Bitcoin for transactions in 2023, falling from 24.4% in 2022.
On the Flipside
- Despite mixed results in El Salvador, US adoption could be different. For one, the United States has a much larger economy, and its population has greater access to crypto.
- While paying taxes in crypto might be an improvement for some people, the advantages are dubious. For one, crypto-to-fiat offramps are relatively well-developed and easy to use.
Why This Matters
If successful, the Bitcoin tax bill will be a major step in boosting the legitimacy of crypto. However, there are significant technical challenges that the agencies would have to consider before implementing it.
Read more about recent crypto legislative initiatives:
FIT21 Crypto Bill Sweeps Through US House in Historic Vote
Read more about the hacks rocking crypto:
Beware: Metallica’s X Account Hacked, Promoted Scam Memecoin
