Bitcoin is Legal Tender, Where?
Plus, Bitcoin Tax Rule Changes
Arizona may become the first state in the country to recognize Bitcoin as legal tender.
The Grand Canyon State may also start accepting Bitcoin for all payments, such as income taxes and other debts.
Who is this champion of Bitcoin who is proposing these measures?
State Senator Wendy Rogers, a Republican. Rogers is also an Air Force veteran and a pilot. She’s introduced a bill, again, to make Bitcoin legal tender in Arizona.
Rogers also previously introduced a bill, in January 2022, to make Bitcoin legal tender in Arizona. It died before its second reading in the legislature. Though the odds of its passage this time may seem remote, recent actions by several states and nations have been positive and have given some optimism to Bitcoin bulls.
With El Salvador and Central African Republic adopting Bitcoin as legal tender, and at least five more nations poised to follow suit, can a US state be far off? It may become fashionable for a US state to throw its weight behind Bitcoin, the only cryptocurrency to have a chance as a national, or international, currency.
As Bitcoin adoption graows around the world, the likliehood of bills like these passing, in many states around the country, will only grow. Very bullish for Bitcoin.
Other digital currencies, with their centralized nature and unlimited supplies, may not stand a chance.
Interestingly, the legal tender bill defines Bitcoin in very accurate, precise terms, as follows:
“the decentralized, peer-to-peer digital currency in which a record of transactions is maintained on the Bitcoin blockchain and new units of currency are generated by the computational solution of mathematical problems and that operates independently of a central bank.”
That is one powerful definition and worth reading again.
The bill regarding payment of government bills, including taxes, is much more broad and seems to have much more chance of passage:
“A state agency may enter into an agreement with a cryptocurrency issuer to provide a method to accept cryptocurrency as a payment method of fines, civil penalties or other penalties, rent, rates, taxes, fees, charges, revenue, financial obligations and special assessments to pay any amount due to that agency or this state.”
Stay tuned. Bitcoin being recognized as legal tender in a US state will be a big deal. Even bigger than El Salvador. And, treating Bitcoin as a currency is in direct conflict with current tax treatment, which classifies Bitcoin as a commodity. And commodities come with capital gains taxes.
So, this Arizona bill may prove to be huge. All over the United States.
Reprieve on Tax Reporting for Crypto Brokers
What is a “crypto broker?”
The IRS hasn’t had time to decide.
Regulations requiring all crypto brokers to report certain transactions to the IRS, effective January 1, 2023, have been delayed “until further notice.”
The proposed rules were part of 2021’s Infrastructure Investment and Jobs Act.
The law would have required the Internal Revenue Service to define what a “crtyptocurrency broker” is, and would have imposed reporting requirements on every such entity.
Specifically, the brokers, Coinbase, Gemini, Binance and others, would be required to file forms 1099-B detailing asset sales and cost basis. This mirrors the requirements placed upon stock and mutual fund brokers.
Under the current infrastructure bill, Section 6050I mandates that crypto brokers handling digital asset transactions worth more than $10,000 report them to the Internal Revenue Service with personal information, likely including the sender’s name, date of birth and social security number. The requirements, aimed at reducing the size of the tax gap, were scheduled to take effect in January 2023, with companies sending reports to the IRS starting in 2024. (From Cointelegraph.com)
(Note - As a CPA who deals in crypto transactions, I would certainly welcome these proposed regulations.)
Critics have argued that previously issued, broader definitions of “crypto broker” by the federal government have been too broad, as they tried to classify all crypto miners and code developers as “brokers.” The main problem with this is that these entities, quite likely, did not have the required information on their “customers” to satisfy the reporting requirements.
More from the Treasury Department statement, explaining the need for more input before a final bill is passed:
“After careful consideration of all public comments received and all testimony at the public hearing, final regulations will be published.”
Thanks, as always, for reading. Please share this newsletter and feel free to leave comments.
Bitcoin Tools, Platforms, Podcasts:
Twitter - Follow The Bitcoin Files on Twitter at @BitcoinNewslet1 for all of my articles, commentary and links to my contributions to Bitcoin Magazine.
Medium - Check out my writings on Medium, including articles not featured in the newsletter. Join my 600 other followers who read and write about crypto. medium.com/@rickmulvey
Podcasts - To hear the top names in Bitcoin, and learn more than you could imagine, check out The Pomp Podcast with Anthony Pompliano, What Bitcoin Did with Peter McCormack, and The Wolf of All Streets Podcast with Scott Melker.
Issue No. 94, February 3, 2023
Rick Mulvey is a CPA, crypto consultant, and frequent contributor to Bitcoin Magazine. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.