Arizona is poised to become the first state to accept tax payments in cryptocurrencies. On Thursday, the state's Senate passed a bill that would allow payment of state income taxes via cryptocurrencies to be “recognized” by the state’s revenue authorities. The law has moved on to be considered by Arizona's House of Representatives.
According to the bill, the state's Department of Revenue, upon receiving payments in crypto for “tax and any interest and penalties”, would be obligated to convert the cryptocurrency payments to U.S. dollars within 24 hours.
The landmark bill speaks to the larger debate regarding the intrinsic value of digital currencies such as bitcoin, the world’s largest cryptocurrency by market capitalization. Skeptics such as legendary investor Warren Buffett and JPMorgan Chase & Co. (JPM
) Chief Executive Officer Jamie Dimon highlight the speculative nature of the cryptocurrency market, doubting that prices fluctuations have anything to do with the assets’ worth as a currency or a store of value. By building a link between digital currency and government revenue structures, cryptocurrencies such as bitcoin could see their usefulness and value rise significantly. (See also: Bitcoin Will Hit $320,000: Winkelvoss Twins.)
At Issue: Innovation
“The ease of use, being able to do it in the middle of the night, being able to do it at home while you’re watching TV … I think in a few years this isn’t even going to be a question,” said Arizona state Rep. Jeff Weninger.
Weninger indicates that the primary goal behind the bill is to support innovation in the state. The law should send “a signal to everyone in the United States and possibly through the world that Arizona is going to be the place to be for blockchain and digital currency technology in the future,” he told Fox News in an interview. Governments have met cryptocurrency regulation with varying approaches in the recent period, in which even cities known as tech hubs have passed restrictive measures. New York’s controversial BitLicense law has been scrutinized for thwarting blockchain innovation in the state and pushing out startups.
The bill includes a provision requiring cryptocurrency payments be converted to U.S. dollars within 24 hours of their payment, addressing concerns over lengthening transaction times, particularly for digital currencies such as bitcoin. (See also: City of Berkeley Considers ICO to Raise Funds.)
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