For the first half of 2022, it has been taxing on anyone involved in the cryptocurrency space. Well, there might be a little relief provided in the way of utility for Colorado residents. The state of Colorado will be the first state in the nation to accept cryptocurrency as a form of payment for taxes. Why is this important?
Two things drive adoption more than anything else and that is the community/user base regarding network adoption and the utility that ushers that in. The importance of this news is the fact that it further profoundly legitimizes crypto through governmental use cases.
Besides selling assets at a loss for tax mitigation reasons and of course, paying taxes on our gains, this option will help drive the incentive to invest in the digital asset space for larger groups of people. Individuals will feel that there is more control over how crypto can be used in their daily lives. This is important to those that are new to the space or waiting to get in by viewing these signals led by institutional money and government. At the end of the day, we all have to pay taxes.
There is no doubt that Governor Jared Polis is bullish on the space long term. Earlier this year at ETHDenver, the largest and longest-running Ethereum event in the world, Polis attended and spoke to the zealous crowd of builders, investors, and crypto enthusiasts. Before that, Polis has helped to pass legislation in 2019 to exempt certain cryptocurrency transactions from Colorado’s securities laws by way of the Colorado Digital Token Act.
What will states do with the cryptocurrency they receive as tax payment? Will they hold some or potentially stake it? The plan as it stands now is for Colorado to convert the cryptocurrency back into USD. The stable coin has been a difficult topic for many of us lately after what happened with the Terra Luna cryptocurrency crash. Perhaps the future will bring other options instead of converting back into fiat. As this rolls out, the next steps aim to include payment options for drivers and hunting licenses for residents.
There are a lot of pluses to being the first at something. If you can do it right, the payoff can be immense and pave the way for the future.
Will other pro-crypto states be right behind Colorado? Looking at Wyoming the state has come to recognize cryptocurrencies and NFTs as intangible property under Article 9 of the UCC “Uniform Commercial Code” further legitimizing crypto from a creditor’s standpoint. This has grounds to be big for the Defi space when dealing with collateralized loans.
Other states such as Texas with their “Virtual Currency Bill” and Florida easing cryptocurrency regulations are working toward weaving crypto into the fabric of their legislature as well. Perhaps a little FOMO will create healthy competition for states’ adoption at a legislative level. The states that believe in crypto want to attract talent to those areas for innovation jobs and that starts at the legislative level as a sign of belief.