By
Temitope Olatunji
April 18th, 2024
The switch to digital currencies is arguably an executive decision or a move that has drawn a lot of comments from experts, some of whom believe the plan is indeed a strategic one.
Colorado State Governor, Jared Polis has confirmed that the state will start accepting payment for taxes in crypto like Bitcoin (BTC) and Ethereum (ETH) amongst others as early as this summer in a bid to become a highly crypto-friendly region. As reported by Coindesk whom the governor spoke to shortly before the ETHDenver Conference the state is currently holding, the state does not plan to HODL the accepted digital assets, hence has little concern for volatility.
“We are touting Colorado as the center of the crypto economy,” said Governor Polis, “We have not only very favorable laws and rules, but we also have a great ecosystem of innovation here.”
According to the governor, the plans to accept crypto for tax purposes in Colorado will be the start of what is expected to trickle down to other related payments in the state. In the long run, Colorado hopes to extend the payment into other licenses and state-related payments.
“We expect by this summer – pretty soon – to accept crypto for all of our state tax-related purposes,” said Polis in a separate interview with CNBC. “Then we plan to roll that out across all of state government for things like, could be as simple as driver’s license or hunting license within a few months after that.”
Governor Polis posited that the plan to accept digital currencies for tax payments is largely aimed at boosting the convenience of the consumers. He said the acceptance of digital currencies will not impact or change the state’s budgets which will still be dominated in US Dollars.
“Our budget is still in dollars, our expenditures are still in dollars, and, of course, we don’t want to take the speculative risk of holding crypto, so we will be having a transactional layer there,” he said. “It will be entering our systems as dollars.”
Colorado Crypto Tax Payment: What Are the Experts Saying?
The switch to digital currencies is arguably an executive decision or a move that has drawn a lot of comments from experts, some of whom believe the plan is indeed a strategic one.
“Colorado’s plan to accept crypto currency for state tax payments and other government fees is proof of crypto’s wide acceptance as both an investment and payment method,” Kell Canty, CEO of Ledgible, said. “Of course, using crypto to pay taxes does not change the tax treatment of the transaction for federal income or state income tax purposes.”
However, experts like Shehan Chandrasekera, head of tax at CoinTracker are of the opinion that paying taxes in crypto will create more tax-related implications for citizens.
“If you are spending appreciated cryptocurrency to pay taxes, that will trigger more capital gains – a never-ending cycle,” he said. “Spending an appreciating asset for something like taxes is not wise, in my opinion.”
Colorado will not be the first state or region to attempt collecting taxes in crypto, however, earlier pioneers in this regard including Ohio and Seminole County, Florida have had to abandon the moves as they were largely unsuccessful. Whether Colorado’s plans will succeed is bound to be unveiled in the near future.