With Federal Rules Unclear, Some States Carve Their Own Path On Cryptocurrencies
Although President Biden just announced an executive order on cryptocurrencies, states still have little guidance about how to respond to the growing popularity of the digital currencies. So a number of states are jumping ahead with crypto bills of their own.
What was once seen as a niche play for tech enthusiasts and investors crypto is now becoming a mainstream financial asset. Some bills go as far as trying to make crypto legal tender, meaning it would be recognized by law to settle debts, both public and private.
Here's what some states are doing:
Republican Senator Wendy Rogers introduced legislation in January pushing to make one of the most popular cryptocurrencies, Bitcoin, legal tender.
It would amend what the state considers legal tender and would allow Bitcoin to be used for payments of debt, state taxes and dues.
A bill introduced by state Democratic Senator Sydney Kamlager in February would allow the state to accept crypto payments for state services that include permits, DMV licenses, certificates and state taxes.
"It would pave the way for you to use digital currency to pay for some of those transaction fees and products that you have to get from the state." said Kamlager.
A Pew Research survey showed that Asians, Blacks and Hispanics were more likely than whites to say they have invested in or used cryptocurrencies. Given that, she says her bill would hopefully address economic inequality. "Folks have been destabilized financially, either because of their race, because of their gender, because of their financial past, because of their past circumstances, or because of financial abuse. And this presents an opportunity to wash all of that away," says Kamlager.
A separate legislative effort by Ian Calderon, former majority leader in the California State Assembly and Dennis Porter, a Bitcoin advocate, would make Bitcoin (and no other cryptocurrency) legal tender in the state.
Governor Jared Polis, a Democrat, announced on social media that the state will begin to accept crypto payments for state taxes and fees and hopes to do so by the end of summer of this year.
One major criticism of crypto is its volatility; prices can swing widely in a single day. Colorado plans to use "a third-party exchange that accepts virtual currency, converts it to U.S. dollars, and transmits the U.S. dollars to the state" through an an electronic funds transfer, says Kate Powell, a spokesperson for Gov. Polis.
If successful the governor will explore crypto payments for all types of payments made to the state.
In 2018, Ohio became the first state that began accepting Bitcoin as tax payments. But that effort was short lived. The online portal that allowed businesses to pay their taxes in Bitcoin shut down less than a year after it was introduced.
In a statement to NPR, the Ohio Treasurer's Office sought to make it clear that "no form of cryptocurrency was accepted by or held in the Ohio Treasury." It also noted that in the months that the online portal was active, only 10 businesses chose to pay their taxes through this method.
Four members of the Wyoming State Legislature have introduced a bill that would allow the state treasurer to issue stable coins, a cryptocurrency that attempts to offer price stability and — unlike popular cryptos such as Bitcoin or Ethereum — is backed by a reserve asset such as the U.S. dollar.
Popular cryptos, such as Bitcoin, have been legal in the U.S., though the IRS currently labels any form of virtual currency as property, not legal tender.
So far the the federal government has not directly responded as states decide on their own whether to declare cryptocurrencies legal tender.
Though most of these bills are in early stages, advocates like Calderon believe they can clear up confusion about what can and can't be done with crypto. "So if there's a little bit more clarity, just from a local government perspective, that's going to significantly help. This is something that the government needs to jump in and start to acknowledge, it's not going away."