In a move likely to catch the attention of public authorities worldwide, a US state’s revenue department has begun to accept tax payments in cryptocurrency.
Colorado’s governor Jared Polis announced the development during a press conference at Denver Startup Week focused on highlighting initiatives to encourage entrepreneurs and small businesses.
The introduction of the ‘Cryptocurrency’ payments option on Colorado Department of Revenue’s online payments portal delivers on a plan revealed by Polis earlier this year.
“We’re just showing again, from a customer service perspective, how Colorado is tech-forward in meeting the ever-changing needs of businesses and residents,” Polis said at the press conference, adding that payments in crypto were possible for all taxes, including individual and business taxes, income tax, sales tax and withholding tax.
Cryptocurrency payments need to be made through online payments system PayPal and come with a ‘service fee’ of $1.00 (about £0.89) plus 1.83% of the payment amount.
Colorado’s crypto champion
Polis said in May that his re-election campaign ahead of the 2022 Colorado gubernatorial election would be ‘the first Democratic gubernatorial campaign to accept donations in the form of cryptocurrency’ and that, more broadly, his ‘embrace of emerging technology continues to foster innovation in Colorado’.
The 2022 Colorado gubernatorial election will take place on 8 November, with Polis aiming to be re-elected for a second term.
“My administration is committed to making Colorado a hub of cryptocurrency and blockchain innovation for years to come,” the Democrat said in May. “While political contributions only scratch the surface of what this critical technology is capable of, I hope that my campaign accepting crypto donations will invite more Coloradans to learn about and unlock the boundless potential of the blockchain.”
Polis signed the Colorado Digital Token Act into law in 2019 and has been a consistent champion of pro-crypto initiatives, for example blockchain hackathons, in the state, which has a population of almost six million people.
The Department of Revenue’s online payments portal states that cryptocurrency payments run through the ‘PayPal Cryptocurrencies Hub’. At time of writing (23 September) the site states that ‘PayPal Personal’ accounts can pay using cryptocurrency but that ‘PayPal Business’ accounts cannot pay using cryptocurrency ‘at this time’.
Governments focused on regulation
About 16 per cent of adults in the US – approximately 40 million people – have invested in, traded or used cryptocurrencies, according to the White House, and a growing number of political leaders have been cheerleading for the crypto sector across the country.
New York City’s mayor Eric Adams, for example, made headlines by announcing that he would be receiving his first three monthly pay-packets in Bitcoin after being elected in January.
But cryptocurrency – digital currency in which transactions are verified and records are maintained by a decentralised system using cryptography, rather than by a centralised authority – is both volatile and controversial. The Bank for International Settlements (BIS) described the crypto universe as being ‘in turmoil’ in a chapter of its Annual Economic Report 2022.
Most governments worldwide are currently more associated with working out how to regulate crypto rather than encouraging citizens to use it. In the US the White House has just published a ‘comprehensive framework’ for the responsible development of digital assets. Its move came just over six months after it issued an executive order setting out a national policy for digital assets across six priorities.
Outside the US, in 2021 El Salvador became the first country in the world to mandate that Bitcoin could be used to pay taxes or buy goods and services. Global Government Fintech reported in July that the Swiss city of Lugano’s public authority was looking to obtain ‘formal approvals and installing the technological infrastructure’ to enable citizens and companies to pay taxes in cryptocurrency in the ‘near future’ – part of a broader ambition of implementing crypto acceptance for payment of all goods and services in the affluent lakeside city.
‘Swiss city looks to enable tax payments by crypto’ – our news story (14 July 2022) on Lugano’s plans
‘ECB calls for “careful monitoring” of crypto-currencies’ – our news story (22 May 2019) on a European Central Bank report noting that crypto assets have raised concerns with regards to money laundering, market integrity and consumer protection, and have possible implications for the financial stability of the eurozone