The Cato Institute has argued that the US should eliminate capital gains taxes on Bitcoin and other cryptocurrencies to encourage greater currency competition.
In a report published Wednesday, Nicholas Anthony, a policy scholar at the think tank, said capital gains tax discourages the use of alternatives like Bitcoin by incentivizing long-term holding and creating significant reporting burdens.
He suggested that the most straightforward solution would be to abolish capital gains taxes entirely, though a more targeted approach could involve removing them specifically for crypto and foreign currencies to “take the government’s thumb off the scale and let competition determine the best form of money.”
“Bitcoiners know the frustration of tax season all too well,” Anthony said. “It’s never been easier to use Bitcoin as money, yet the tax code places an enormous burden on law-abiding users. Even something as simple as buying a daily coffee with Bitcoin can generate over 100 pages of tax filings.”
The Cato Institute, a US-based public policy think tank, has previously advocated for crypto-friendly policies and its members have testified before lawmakers on related issues.
Eliminating capital gains tax could help create a more competitive economy, particularly by making it easier to use crypto for everyday transactions.
Currently, using cryptocurrencies to pay for goods or services can trigger a taxable event, as they are treated similarly to assets like stocks or real estate, according to investment firm VanEck.
Nicholas Anthony suggested that one alternative could be removing capital gains tax specifically for purchases made with crypto. However, he cautioned that this approach could introduce new compliance challenges if users are required to prove how transactions were conducted. “That’s better than being taxed, but the process would still be taxing,” he noted.
He also highlighted the possibility of a de minimis threshold, where capital gains tax would only apply once transactions exceed a certain value.
“The only thing worse than getting robbed would be having the robber demand endless forms about the money they are taking from you. Taxes are no different,” Anthony said.
“Congress should simplify the tax code so the average American can do what’s required with ease. Doing so would go a long way toward easing Americans’ stress each tax season and creating a more competitive economy.”
A 2025 survey by the National Cryptocurrency Association found that 39% of US crypto holders have used digital assets to pay for goods and services.
Meanwhile, academic publisher Springer Nature, citing BTC Map data, identified around 11,000 merchants worldwide that currently accept Bitcoin as a form of payment.
