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Cryptocurrency Crash Affects US States Tax Payment Plans via Bitcoin

thecryptobasic.com 05 July 2022 15:12, UTC
Reading time: ~2 m

The Recent Crash of Cryptocurrencies Puts a Damper on State Attempts to Accept Taxes in Bitcoin.

According to a recent report by Bloomberg, two states in the United States were moving forward with plans that would allow taxes to be paid in cryptocurrencies, but the concept has been shelved nearly everywhere else in the aftermath of the crisis that has wiped out tens of hundreds of billions of dollars in of crypto assets.

The article added that virtual currency tax payment systems for companies and people are being developed by the revenue departments in Colorado and Utah and are expected to be implemented over the next few months. Some practical issues still need to be worked out before the two Western states’ plans can go into effect.

Because of the sell-off, the global cryptocurrency market’s worth has fallen to less than $1 trillion from a high of $3 trillion in November. In only a few days, the value of Bitcoin has fallen by over 75 percent.

At least six other states have contemplated following Colorado and Utah’s footsteps, but after the fall, the chorus of experts, watchdogs, academics, and crypto critics are now urging legislators against putting the state’s finances and taxpayers in danger.

Lee Reiners, executive director of Duke University’s Global Financial Markets Center told Bloomberg:

“Anything involving crypto is less appealing in the wake of the massive volatility we’ve seen over the last month, and frankly the last six months, I don’t know if that slows momentum at the state level for payment of taxes, but it doesn’t help. And there is no financial benefit to the states to permit it.”

However, the regular monetary system and the realm of cryptocurrencies may connect with one another via the use of payment gateways. 

They provide a very important function by fixing the exact dollar value of a coin at the time of the transaction. If they did not accomplish this, the tax authorities may find themselves short of money in the blink of an eye.

However, as Crypto Winter is about to set in, momentum has been steadily decreasing. The fall of the market also raises some practical difficulties regarding the viability of the tactics used by Colorado and Utah.

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