Colorado to Begin Accepting Cryptocurrencies for Taxes: Report

by TK Sanders
colorado-begin-accepting-cryptocurrencies-taxes-report

The state of Colorado just announced that its residents will be able to pay their local taxes in cryptocurrency this year. Governor Jared Polis discussed the timing and outlook of the move recently, calling the initiative a longtime ambition of the state’s.

“We expect by this summer to accept crypto for our state tax-related purposes,” he said in a televised interview. “And then we plan to roll that out across all state government for things. It could be as simple as a driver’s license or hunting license.”

Around 40 percent of all state governments are considering similar legislation; though just an estimated 16 percent of the country’s population owns any digital currency. Polis has made the acceptance of cryptocurrency, and its technological underpinning the blockchain, a priority of his term in office. He even accepted bitcoin donations during his campaign.

This week’s announcement is the product of nearly 10 months of work, according to the governor’s office. The state first announced a plan to accept crypto for tax purposes in May of 2021.

Colorado, or any state government for that matter, cannot expose itself to market fluctuations like a traditional investor. Bitcoin, ethereum, and other digital currencies swing wildly based on trading volume; therefore the state would convert the assets back into dollars immediately upon receipt.

“When we talk about accepting crypto for payments, we would convert it back into dollars for our purposes. So there’d be an intermediary there that would then convert them,” Polis said.

“Just like accepting a credit card, but with a much lower transaction cost than a credit card.”

Colorado is bucking U.S. government guidance by accepting cryptocurrency

What will be interesting to watch unfold is how Colorado justifies the initiative to the U.S. federal government, which views cryptocurrency as an asset that must be taxed. Traditionally, money is the medium to express value of an asset — and therefore its taxability — not the asset, itself. Cryptocurrencies, while also a medium to express value theoretically, still come attached with traditional values attached to them.

Therefore, the state of Colorado views crypto in a fundamentally different way than the U.S. government. In the eyes of the U.S. government, accepting crypto is like accepting diamonds or clothing to pay taxes. Crypto is a product, not a currency, so the exchange is more akin to a pre-modern outpost trade, of sorts.

But the most beautiful thing about the United States and the doctrine that binds us is the fluid balance of power between states and the federal government that our founding fathers established in our charter. States maintain an enormous amount of autonomy within the power structure, by design; they are free to operate however their constituents see fit based on democratic elections.

Outsider.com