Now Coloradanscan pay their state taxes and fees using cryptocurrency. State Governor, Jared Polis, recently made the big announcement that his state will now accept cryptos as payment against taxes and fees.
With this development, Colorado has become the first U.S. state to accept Bitcoin and Ethereum for taxes and fees . It was also the earliest state to use blockchain technology in government infrastructure. According to the Governor benefits of crypto, the state will accept digital coin payments and will make equivalent-value deposits in dollars into the state treasury.
First U.S. State to Accept Cryptocurrency
While Colorado will become the first state to officially accept crypto payments for taxes, Ohio has had already tried a similar program as a test run back in 2018. It was eventually abandoned after a year of test runs.
Colorado’s Governor Polis has been a supporter of crypto for long. During his 2014 campaign for the U.S. Congress, he accepted Bitcoin in the form of donations. It was followed after a Federal Exchange Commission’s ruling favoring his stand.
According to him, his state has been working to lay the foundation for crypto innovation. He and his administrationseecrypto and blockchain as an important part of the overall push for innovation in the state. If everything goes according to plan, Colorado should start processing and accepting crypto by this summer.A more specific timeline is still expected from the governor.
Crypto-Related Developments in Other States
Colorado’s acceptance of crypto for taxes comes at a time when a number of other states, including California and Arizona are also working on proposed laws. Once passed, these states can start accepting Bitcoin and other cryptos, not just as tax payments, but also as other forms of payments.
Outside the United States, El Salvador has already legalized Bitcoin. The nation’s Legislative Assemblypassed a lawback in June 2021 making Bitcoin a legal tender for all forms of transactions, including daily purchases.
Arguments Against Cryptocurrency Acceptance
Cryptostill seems to have more critics than acceptors. Most criticsare focused on highlighting the volatility of these currencies. In the case of El Salvador, many criticsclaim that fears of inflation could lead to significant economic damage. Even the IMF has been at the forefront of asking the nation to reverse its financial decision.
The interest and amounts of investments in crypto have seen a massive surge during the pandemicera. Bitcoinrecorded over 300% growth from March to December 2020. After touching its peak price of around $69,000 in November 2021, it has now crashed down by almost 45%.
Colorado’s Cryptocurrency Legislation
Colorado’slawmakers are currently working on a law that will enable the state to issue its own digital coins. These tokens can be used for raising funds for specificbuilding initiatives and projects. This will eliminate the need for the issuance of bonds or increasing taxes.This is expected to make an impact on the state’s credit rating.
In an earlier development, Denver made successful use of blockchain-based voting for ballot validation. The system was used to validate the ballots from the city’s residentswho were in the military or located overseasat the time of the election.
The state’s governor intends to make Colorado the first “digital state in the U.S.”The state will make use of an external-facing portal. Initially, BTC and ETH will be accepted for state-related taxes. Later on, the state will extend crypto acceptance for all forms of state fees, such as paying for a hunting license or driver’s license.
Overcoming the Challenge of Crypto Volatility
Extreme volatility has been a unique characteristic of cryptocurrency for long. The state’s administrationclaims that their system has taken this factor into account.The state will not hold crypto as an asset class. Once the residents make payments using BTC and ETH, the digital coins will be converted into dollars in real-time. According to the Governor, the payment will be accepted just like that with a credit card, but the transaction costs will be much lower.
Governor Polis believes that the public sector can benefit big from the blockchain technology that supports cryptocurrencies. It goes against the very concept of the decentralized technology to have any form of government-based security.However, the state’s administration believes that it has a lot to benefit from crypto in terms of accepting it as payment and in reducing transaction costs. It is also expected to create new asset classes and protectthe residents’ privacy.