Taxes have hindered Bitcoin’s function as a currency, according to a Cato Institute analyst., 2026/04/17 16:54:17

Analyst from the Cato Institute, Nicholas Anthony, has urged U.S. authorities to eliminate the capital gains tax on cryptocurrencies, as such levies turn every minor purchase made with Bitcoin into a bureaucratic hassle and hinder BTC from becoming a means of everyday transactions.

The sales tax on cryptocurrencies is a fixed percentage, and to calculate the capital gains tax, Americans must report to the Internal Revenue Service (IRS) the date they received Bitcoin, the date they used it to pay for goods or services, the amount of the initial Bitcoin purchase, and the profit or loss from each transaction. Given the complexity of this process, there is a risk of making errors in tax reporting and incurring penalties. This could deter individuals who might otherwise be interested in using Bitcoin as a payment method, Anthony lamented.

If a cryptocurrency holder spends Bitcoin daily, the tax reporting form could require at least 70 pages, the analyst notes. He believes this discourages Americans from utilizing BTC in real life, leading them to hoard cryptocurrency instead of making daily payments. Bitcoin payment wallets such as Bull Bitcoin, Zeus, and Trezor, along with the payment service Block, formerly known as Square, are operational in the Bitcoin payment market, but taxation has effectively “paralyzed the use of Bitcoin as currency,” the analyst stated.

“The tax code imposes an incredible burden on law-abiding citizens. Even something as simple as buying a cup of coffee with Bitcoin could result in individuals needing to fill out around 100 pages of tax returns,” wrote the Cato Institute specialist.

He called on Congress to “fix this mess” and suggested completely abolishing the capital gains tax on cryptocurrency payments to encourage competition, or alternatively, implementing a reduced tax rate for everyday expenses in cryptocurrencies. Anthony also proposed the adoption of a “fair taxation law for virtual currencies,” which would exempt private transactions made with cryptocurrencies from taxes if the profit was less than $200 per transaction.

“The only thing worse than being robbed is when the robber demands that you endlessly fill out paperwork about the money they are taking from you. Taxes are no exception,” Nicholas Anthony quipped.

Last year, Eric Trump, son of former President Donald Trump, discussed plans from the White House administration to abolish the capital gains tax for U.S.-registered companies involved in blockchain, cryptocurrency mining, and decentralized finance (DeFi).