Jack Dorsey, founder of payments company Square, has urged the introduction of a de minimis tax exemption on small Bitcoin (BTC) transactions to help make the cryptocurrency more suitable for everyday payments.
“We want Bitcoin to be everyday money ASAP,” Dorsey said on Wednesday, following Square’s integration of Bitcoin payment services for merchants using the company’s checkout and point-of-sale systems.
His comments drew attention from Wyoming Senator Cynthia Lummis, who introduced a de minimis tax provision as part of a standalone crypto tax bill in July, exempting BTC transactions $300 or under from capital gains tax with an annual exemption cap of $5,000.
Source: Cynthia Lummis
Under current US tax laws, all Bitcoin transactions are subject to capital gains tax, which the holder must pay if the price of BTC rises above the initial purchase price, limiting Bitcoin’s use as a medium of exchange.
Bitcoin advocates continue to push for tax exemptions on small BTC transactions to encourage the digital currency’s use as a peer-to-peer digital cash system envisioned in BTC creator Satoshi Nakamoto’s whitepaper, alongside its use as a store-of-value asset.
Related: US lawmakers grapple with crypto tax policy amid government shutdown
Crypto industry executives and supporters push for tax exemption
The United States Senate Committee on Finance held a hearing in October to discuss crypto tax regulation amid the US government shutdown.
Lawrence Zlatkin, the vice president of tax at crypto exchange Coinbase, asked the Senate to codify a de minimis tax exemption for crypto transactions of up to $300.
Zlatkin argued the exemption would encourage crypto payments in retail commerce and ensure that payment innovation takes place in the US and not abroad.
Several jurisdictions already feature favorable tax treatments on digital assets in order to attract investment, including the United Arab Emirates (UAE), Germany, and Portugal.
The favorable tax treatment in other countries makes it attractive for crypto companies and funds to establish operations in those jurisdictions, leaving the US at a competitive disadvantage compared to these first movers.
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