- Cato Institute proposes removing capital gains tax (CGT) on crypto
- Bitcoin usage discouraged due to tax complexity and reporting burden
- Daily transactions can lead to extensive tax filings
- Alternative proposals include de minimis thresholds and selective tax removal
- 39% of US crypto holders use crypto for payments
Imagine every swipe of your card turning into a tax form.
That’s what happens when spending Bitcoin.
If you buy a coffee with Bitcoin, the government makes you pay capital gains taxes on top of sales taxes.
Spending Bitcoin daily can turn into 70 pages in tax filings. pic.twitter.com/4At19JCFey
— Nick Anthony (@EconWithNick) April 15, 2026
The Cato Institute, a US-based public policy think tank, has proposed eliminating capital gains taxes on Bitcoin and other cryptocurrencies to encourage greater currency competition. In a report released Wednesday, Nicholas Anthony, a policy scholar and research fellow at the institute, stated that capital gains tax discourages the use of alternative currencies like Bitcoin. He noted that the current tax structure incentivizes long-term holding while imposing additional reporting burdens on users.
Anthony highlighted the complexity of tax compliance, stating that even routine transactions, such as purchasing coffee with Bitcoin, could result in extensive documentation. He emphasized that while using Bitcoin as a payment method has become easier, tax requirements remain a significant barrier.
“Bitcoiners know the frustration of tax season all too well. It’s never been easier to use Bitcoin as money,” he said. “Yet, at the same time, the tax code puts an incredible burden on law-abiding citizens. Something as simple as buying a cup of coffee every day with Bitcoin can result in more than 100 pages of tax filings.” He noted that while using Bitcoin for payments has become easier, the tax code creates compliance challenges for users.
Alternative Policy Approaches
Anthony outlined several policy options, including the complete removal of capital gains taxes. Another approach would involve eliminating such taxes specifically for cryptocurrency and foreign currency transactions to promote fair competition among different forms of money.
He also suggested removing capital gains tax only for purchases of goods and services. However, he noted that this approach could create additional compliance challenges if users are required to verify transactions. Another proposed option is implementing a de minimis threshold, where capital gains tax would only apply if transactions exceed a specified limit.
Crypto Usage and Market Context
Crypto is steadily evolving from a speculative asset into a functional payment layer, but its real world use is still shaped by regulatory design. Across many countries, using crypto for payments is treated as a taxable event, which makes everyday transactions less intuitive than traditional money.
At the same time, global regulators are moving toward tighter oversight, with stronger reporting rules, anti money laundering frameworks, and cross border data sharing becoming standard practice.
Adoption is growing in parallel, especially in cross border payments where stablecoins and blockchain networks are enabling faster and cheaper settlement compared to legacy systems.
This creates a structural tension: crypto is increasingly useful, yet operationally complex due to compliance requirements and tax implications. The technology is ready for scale, but the user experience is still constrained by policy layers.
The next phase of growth will depend less on innovation alone and more on how seamlessly crypto integrates into existing financial systems without adding friction for everyday use.
