Colorado has officially become the first state in the U.S. to accept cryptocurrency for tax payments.
People can now pay taxes using the PayPal Cryptocurrency Hub. PayPal incurs service fees of 1.83 percent of the total payment and an additional $1.00. This new regulation only applies to personal taxpayers and can only be done using one cryptocurrency per transaction.
A payment using this mode takes three to five days to register. The crypto tokens are converted into U.S. dollars. This payment option is now available on Colorado’s Department of Revenue website.
Colorado governor Jared Polis, a co-founder of the Congressional Blockchain Caucus, announced the plan to accept cryptocurrency for tax payments earlier this year.
“We’re just showing again, from a customer service perspective, how Colorado is tech-forward in meeting the ever-changing needs of businesses and residents,” Polis said.
Polis likened the state to a “blockchain technology” because it always finds novel ways to approach various issues. The state’s capital, Denver, was recently named among the leading cities in the U.S. for crypto adoptions. Denver is currently hosting Denver Startup Week to accommodate new start-up businesses in the city, including crypto companies.
Crypto adoption in other U.S. regions
Other U.S. states have tried to use cryptocurrency as a tax payment mode. Ohio introduced the regulation in 2018, but the service was suspended in 2019 following some legal issues. New Hampshire also proposed the bill to use cryptocurrency for tax payments, but it was rejected.
Arizona, Illinois, Georgia and California also considered crypto adoption for all state payments. California Senator Sydney Kamlager launched a bill to revise the state’s code so it could accept cryptocurrency for some civic payments in February this year. There has been no update on the progress.
I’m beyond excited to announce my campaign is dropping an exclusive collection of NFT’s!— Jared Polis (@PolisForCO) June 13, 2022
I’ve always supported emerging technology and I’m looking forward to being among the first to implement NFT’s into campaigns. https://t.co/RS15wG8ox4
Tennessee reportedly also introduced a bill in February to enable the state to invest in cryptocurrency. This bill also did not see any progress after several months.
FlyFin chief executive officer Jaideep Singh said that in the future, cryptocurrencies would be regulated by the government. According to Singh, the regulation would likely start by reporting crypto transactions on the tax. After that, government bodies might start to monitor crypto transactions.
“It is the responsibility of governments to make sure that its citizens are not defrauded, criminal activity is curtailed, and that taxes are not being circumvented,” Singh said. “So, this new development happening in Colorado was only a matter of time.”
CoinFlip COO Ben Weiss said that Colorado’s adoption of cryptocurrency might cause a “chain reaction”. He said other states might follow Colorado, and society would acknowledge cryptocurrency as a legitimate currency.
“This advancement may also encourage crypto transactions to be implemented in other places statewide, such as at a local DMV [department of motor vehicles],” Weiss added. “This is a great opportunity for Colorado to build its reputation as a tech hub and mark its place on the forefront of a digital revolution.”
Patrick Whites of Bitwave said that using cryptocurrency for tax purposes would likely increase the demand for digital currency. He said it would accelerate the federal government's involvement in the crypto market and increase financial understanding among citizens.