Colorado is now the first state in the United States that will accept cryptocurrencies for fee payments and state tax. The residents of Colorado can now use Ethereum and Bitcoin to pay their taxes. This will be starting from June 2022.
The same has been announced by Jared Polis, the governor of Colorado.
To ensure that the difficulties associated with the volatility of cryptocurrencies are mitigated, the state will first accept payments in the form of cryptocurrencies. Then, in real-time, the payments will be converted to an equivalent amount in dollars. Then, these payments will be deposited in the state treasury.
So, the cryptocurrency tax payments in Colorado bear similarities to payments made using credit cards. This comes with the bonus of no returned payments, so the governor has tweeted.
Governor Jared Polis has also created another post for Instagram. In this post, the governor has stated that the authorities have been working towards creating the relevant infrastructure in Colorado. This has been to ensure that the state becomes a center for blockchain and cryptocurrency innovation.
The governor has defined this as a critical part of Colorado’s innovation ecosystem. He has further specified that starting this summer, Colorado will accept cryptocurrencies for state tax and fee payments.
He said that they are getting a payment provider for accepting crypto equivalent and depositing the dollars into the state’s treasury for that amount.
By Governor Jared Polis, this is not the initial foray into the domain of cryptocurrencies. It was also during his 2014 race for United States Congress that he had accepted Bitcoin as campaign donations.
A few weeks back, the governor had given an important interview in which he demonstrated his vision for cryptocurrency acceptance in Colorado, from tax payments. He had also expressed that Colorado had plans to come up with a future state token.
Another noteworthy development regarding the matter was that in 2019, Governor Jared Polis signed the Colorado Digital Token Act. This exempted cryptocurrencies from several securities regulations with a primarily consumptive purpose.
It is noteworthy that in 2018, Ohio too had attempted a similar move by making it permissible for businesses to pay several of their taxes via cryptocurrencies. Nevertheless, the law was scrapped a year hence for the claims that no proper review was done over it.
Notwithstanding the existing regulations, numerous states across the US harbor an experimental approach toward cryptocurrencies. Just as an instance, in Wyoming, a legislature has been introduced for attracting cryptocurrency miners. The state of Texas has, similarly, granted a 10-year tax exemption for cryptocurrency miners. Further, in Texas, the miners also access sales credits, a 10-year tax exemption alongside worker training sponsored by the state to attract them.
Miamicoin, which is a city coin, was launched last year by Miami. Eric Adams, the mayor of New York City has further expressed that he has plans to make New York City the center of the cryptocurrency industry.
When we consider instances from outside the US, we find that El Salvador also recently ventured on a similar path. A law was passed by El Salvador’s legislative assembly in June 2021 to make Bitcoin a legal tender. Henceforth, cryptocurrencies could be used in everyday transactions.
The view of the entities critical of accepting cryptocurrency transactions should also be brought to light here. Such entities harbor doubts regarding the possibilities of unprecedented inflation and volatilities that are associated with cryptocurrencies. These problems could lead to El Salvador’s economic destruction. In January, the IMF called for El Salvador to reverse its decision.
While the pandemic lasted, investments in cryptocurrencies have skyrocketed, and so have the interests being derived from the same. Bitcoin, which is the original digital currency was experiencing gains of over 300% in midst of March and December 2020. Bitcoin crashed down to 45% after it experienced an all-time high in November 2020.
The Governor of Colorado has nevertheless failed to identify the exact dates wherein taxes and related fees will be payable in Colorado in cryptocurrencies.
Gov. Polis’s intent to allow cryptocurrencies to be used for state tax payments and the related fee has more to it. In all likelihood, crypto may be used for charges related to obtaining a driver’s license or a hunter’s license in Colorado.
The governor is planning to obtain the services of a payment provider, which will accept a crypto equivalent, and convert the assets into the USD, which goes to the Colorado state treasury.
As per the National Conference of State Legislatures (NCSL), cryptocurrency is a virtual or a digital currency. While cryptocurrencies are not backed by the US government, they also do not find the backing of any other central banks or governments.
Henceforth, geography and transaction fees bear no value in the case of cryptocurrencies. Cryptocurrency transactions can stay anonymous.
Industry experts perceive Colorado’s Governor’s move as a symbolic message for the people of Colorado, that just as in the case of credit cards, now cryptocurrency payments are also validated across Colorado.
It was under Polis’ administration that the first chief blockchain architect was appointed. He is Mr. Thaddeus Batt and works as a part of the state’s Blockchain council.
Mr. Batt’s role involves expanding Blockchain technology within the government agencies of Colorado. This would cover taxation of digital assets, banking services and support, and policy and regulatory clarity.
Eric Adams, the mayor of New York City had recently announced that he’d be converting his first paycheck to Etherium and Bitcoin. He’d do so via Coinbase, the largest cryptocurrency exchange across the US.
Walmart is also planning to create its own cryptocurrency and a collection of NFTs, which are Non-Fungible tokens.
The use of cryptocurrencies is growing in prominence. Henceforth, the FBI has come up with a dedicated team for the matter. Herein, prosecutor Eun Young Choi is the agency’s first director of the National Cryptocurrency Enforcement Team (NCET).
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