US Should End Crypto Capital Gains Tax as Bitcoin Payment Use Grows; Report

TLDR

• The Cato Institute called for ending capital gains taxes on Bitcoin and other cryptocurrencies.
• The report said current tax rules discourage crypto use as a payment method.
• Cato’s Nicholas Anthony said daily Bitcoin spending can create heavy filing requirements.
• The report outlined options including full repeal, crypto-specific relief, and de minimis exemptions.
• A 2025 survey cited by Cato said 39% of U.S. crypto holders used crypto for purchases.

The Cato Institute has called on the United States to remove capital gains taxes on Bitcoin and other cryptocurrencies, arguing that the current tax treatment makes digital assets harder to use as money. In a new report, Nicholas Anthony, a policy scholar and research fellow at the Washington-based think tank, said the tax code places added reporting burdens on crypto users and favors long-term holding over everyday spending.

Anthony said the current structure discourages the use of alternative currencies by treating transactions involving Bitcoin and other digital assets as taxable events in many cases. Under existing rules, users may need to report the acquisition date, sale or spending date, original purchase price, and the gain or loss tied to each transaction. He said this process makes small day-to-day payments more difficult for people trying to use crypto for goods and services.

The report argued that the simplest option would be to eliminate capital gains taxes entirely. Anthony also outlined other approaches, including ending capital gains tax treatment for crypto and foreign currency use, removing the tax for purchases of goods and services, or creating a de minimis threshold under which smaller transactions would not trigger tax liability. He said each option would reduce barriers to currency competition, though he described full removal as the clearest solution.

Cato Says Tax Rules Discourage Crypto as Currency

Anthony said capital gains taxes create a structure that does not fit the use of money. In his view, the tax system encourages people to hold digital assets for longer periods rather than spend them, because any use of crypto in a transaction can generate tax paperwork. He also said the compliance process can expose users to audit and penalty risk if records are incomplete or incorrect.

The report pointed to routine consumer use as an example of the burden. Anthony said that using Bitcoin for a daily purchase such as coffee could create dozens of pages of tax filings over time. He referred to Form 8949 and Schedule D of Form 1040 as part of the process that crypto users may face when reporting gains or losses linked to spending activity.

Cato also noted that crypto payments are becoming easier on the technology side. The report said payment firms and self-custody wallet providers have made it easier for consumers and merchants to transact using Bitcoin. Anthony argued that the tax code, rather than the technology, is now one of the main obstacles to wider use of crypto as a medium of exchange.

Lawmakers Have Several Tax Reform Options

Among the policy alternatives discussed, Anthony pointed to a de minimis rule as one possible path. Under that approach, smaller crypto transactions would not trigger capital gains taxes unless gains exceed a set threshold.

He referenced the Virtual Currency Tax Fairness Act, which proposes an exemption for personal crypto transactions with gains of $200 or less, though he argued the threshold should be set higher.

He also discussed removing capital gains taxes only for purchases of goods or services, but said that method could still create compliance burdens if users are required to prove the nature of each transaction. In the report, Anthony said Congress should simplify the code in a way that allows individuals to meet their obligations more easily and use competing forms of money without added complexity.

Crypto Payment Use Remains Part of the Debate

The discussion comes as crypto payment activity continues to develop in the United States and abroad. A 2025 National Cryptocurrency Association survey cited in the report found that 39% of US crypto holders said they had used digital assets to purchase goods and services. Data referenced from BTC Map also showed about 11,000 merchants worldwide accepting Bitcoin payments.

Cato framed the tax issue as part of a broader debate over currency competition and consumer choice. Anthony said removing capital gains taxes on crypto or foreign currency use would allow the market to decide which forms of money work best.

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