Representatives from the Bitcoin Policy Institute (BPI), a nonprofit organization advocating for Bitcoin, cautioned that US lawmakers have not included a de minimis tax exemption for Bitcoin transactions under a certain amount.
“De Minimis tax legislation may be limited solely to stablecoins, leaving everyday Bitcoin transactions without any exemption,” Conner Brown, BPI’s head of strategy, stated on X, indicating that the choice to exclude Bitcoin (BTC) is a “serious error.”
In July, Wyoming Senator Cynthia Lummis introduced a bill that proposed a de minimis tax exemption for cryptocurrency transactions of $300 or less, with a $5,000 annual cap on tax-free transactions and sales.
The proposed bill also encompassed tax exemptions for digital assets intended for charitable donations and tax deferment for cryptocurrency earned through mining proof-of-work (PoW) protocols or staking to secure blockchain networks.
Advocates for BTC assert that allowing tax exemptions on small Bitcoin transactions would enhance its use as a medium of exchange, not merely a store of value, fostering a new financial system based on a Bitcoin standard.
The discussion surrounding de minimis tax exemptions has also prompted inquiries regarding whether such relief should extend to stablecoins, which are intended to maintain a consistent value.
“Why would you even require a De Minimis tax exemption for stablecoins?” Marty Bent, the founder of media company Truth for The Commoner (TFTC), wrote on X. “They maintain their value. This is absurd.”
Cointelegraph reached out to BPI regarding the proposed legislation but had not received a reply by the time of publication.
Related: Japan’s new crypto tax could awaken a ‘sleeping giant’ of retail investors
Bitcoin is appreciating in value, but not being utilized as peer-to-peer electronic cash
The Bitcoin white paper, written by its anonymous creator Satoshi Nakamoto in 2019, defines Bitcoin as a “peer-to-peer electronic cash system.”
However, relatively high transaction fees, average block times of approximately 10 minutes, and capital gains taxes on Bitcoin hinder its use as a method of payment for goods and services.
Many Bitcoin investors prefer to hold BTC long-term, sometimes borrowing fiat currency against their BTC assets to cover costs and fund daily purchases.
The Bitcoin Lightning Network is a second-layer protocol designed for BTC payments, facilitating the locking of a specific amount of BTC in a payment channel shared by two or more parties.
Participants connected through a payment channel can perform multiple transactions offchain, with only the final net balance recorded on the Bitcoin ledger for settlement once the channel closes.
This speeds up Bitcoin transactions and reduces costs, as users within the payment channel do not need to wait for new blocks to be mined or incur a network fee for each transaction exchanged within the channel.
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