Cato Institute Criticizes U.S. Bitcoin Tax Rules as Barrier to Payments, Calls for Reform

Gate News message, April 16 — The Cato Institute, a Washington-based think tank, has criticized current U.S. bitcoin tax policy for hindering the cryptocurrency’s adoption as a payment tool. Researcher Nick Anthony argues that treating bitcoin as “property” rather than “currency” requires users to calculate capital gains or losses on every transaction, no matter how small, creating excessive tax filing complexity.

Under the existing tax framework, even everyday purchases in bitcoin trigger individual capital gains calculations, effectively discouraging its use in daily payments. The Cato Institute proposes several reforms, including completely eliminating capital gains taxes on cryptocurrency payments and introducing a small-transaction tax exemption threshold.

The institute referenced the proposed Virtual Currency Tax Fairness Act, which would exempt crypto transactions under $200. However, Anthony argues the threshold is too low to meaningfully support consumer spending patterns. The Trump administration has already signaled support for establishing a small-transaction tax exemption for crypto trades and will continue evaluating legislative options.