TL;DR
- Nicholas Anthony urged Congress to remove capital gains taxes on Bitcoin and other cryptocurrencies so the US can allow real currency competition.
- He said the current system discourages spending, rewards holding, and can turn routine purchases into a compliance burden with extensive tax filings.
- Anthony also pointed to rising real-world use, citing survey data showing 39% of US holders spent crypto in 2025 and about 11,000 merchants accept Bitcoin worldwide.
The Cato Institute is making a direct pitch to Congress: remove capital gains taxes on Bitcoin and other cryptocurrencies if the US wants genuine currency competition. The argument is that crypto cannot function smoothly as money while every everyday purchase is treated like a taxable investment event. In a report released Wednesday, policy scholar Nicholas Anthony said the current tax code discourages the use of alternative currencies by rewarding long-term holding and imposing reporting burdens that turn routine spending into an administrative chore for law-abiding users across the country during tax season each year now.
Anthony says the cleanest solution would be to end capital gains taxes entirely, though he also sketches narrower alternatives aimed specifically at crypto or foreign currency use. Even the fallback options, however, still reveal how awkward the current framework has become for people trying to spend digital assets normally. He said exempting purchases of goods and services could still create a compliance nightmare if users must prove which transactions qualify, while a de minimis exemption could offer another path by avoiding tax triggers below a defined threshold for small routine transactions in daily commerce nationwide.
Tax Friction Is Colliding With Payment Adoption
At the heart of Anthony’s case is a simple complaint about friction. A tax system that treats buying coffee with Bitcoin like selling an appreciated asset makes ordinary use feel absurdly complex. He argued that something as small as paying for a daily cup of coffee with Bitcoin can produce more than 100 pages of tax filings, turning what looks like technological progress into a paperwork problem. For Anthony, simplifying the code would reduce stress for average Americans and help create a more competitive economy by making compliance easier to understand and actually follow consistently.
The broader backdrop suggests the issue is no longer purely theoretical. Crypto is already being used for payments, yet the tax treatment still pushes it back toward being a held asset instead of a spent one. Anthony pointed to survey data showing that 39% of US crypto holders reported using crypto to buy goods and services in 2025. The article also cited BTC Map data identified by Springer Nature showing about 11,000 merchants worldwide currently accept Bitcoin, underscoring the gap between growing payment use and a tax code still built for capital assets in practice.
