Lawmakers in these two Western states want to mainstream cryptocurrency

Proposals in Arizona and Wyoming to let residents pay taxes in digital money have legal and political hurdles to clear, but proponents believe the efforts are a move toward broader acceptance of cryptocurrency

State legislatures for the past few years have been exploring ways to regulate and take advantage of the growing interest in cryptocurrencies. This year, two states in the West have captured national attention for proposals that would allow tax payments in digital currencies.

A bill before the Arizona Legislature would amend state law to include Bitcoin as legal tender to pay “debts, public charges, taxes and dues.” And a proposal in Wyoming isn’t limited to a specific currency, but it would only apply to payment of local sales and use taxes.

“Both proposals face potential legal and political hurdles. But Wyoming has gone further than any other state in passing laws to accommodate cryptocurrency adoption, and backers of the proposal there believe it will be the first state to take a significant step in the realm of tax payments,” Politico reported.

A National Conference of State Legislatures summary shows 33 states considered proposals last year dealing with digital currency. And Wyoming has been on the forefront in establishing the groundwork to take advantage of digital currency’s growing popularity and potential.

“For the last four years, Wyoming has done profound legislation that has achieved global attention with its groundbreaking concepts,” state Sen. Tara Nethercott, R-Cheyenne, who sits on the state’s Select Committee on Blockchain, Financial Technology and Digital Innovation Technology, told the Wyoming Business Report.

The state’s Republican U.S. Sen. Cynthia Lummis, one of the more vocal crypto champions in Congress, plans to introduce a comprehensive bill this year that would cover everything from how digital assets are taxed and categorized to consumer protections, Bloomberg recently reported. 

Colorado is also trying to stake its claim in the cryptocurrency industry. reported last year that Gov. Jared Polis, a Democrat, told a gathering of digital currency supporters that his state “would be thrilled to be the first state to let you pay your taxes in a variety of cryptos.”

“Colorado is and will be the center for blockchain innovation in the United States, attracting investments and good jobs and innovators in infrastructure, digital identity, (and) individual data security in the private and public sector,” he said, without giving details on how that ambitious plan would roll out.

Local leaders around the country are also looking for opportunities to cash in to create jobs and finance public projects, according to The New York Times.

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Symbolic stunts?

Cryptocurrencies are decentralized digital currencies that can be used to buy and sell products. Owners often have a digital wallet that allows them to buy or sell coins through digital exchanges. The wallets are often online, or they’re stored offline on a hard drive.

While some retailers accept virtual currencies and support state efforts to help the innovation grow, no states currently allow for taxes to be paid in crypto. Ohio was the first to announce businesses could use Bitcoin to pay tax bills in 2018. But the service lasted less than a year before it was declared illegal and shut down.

And some observers see the efforts in Wyoming and Arizona as little more than symbolic stunts to push volatile digital currencies into mainstream acceptance.

The Arizona bill declaring Bitcoin as legal tender has a particularly high hurdle to clear as the Constitution restricts the power of states to issue their own money.

“Arizona could certainly pass a law like this and the state government could choose to accept Bitcoin as payment for Arizona taxes, but this would not change the legal treatment of Bitcoin as property from a federal tax perspective,” Preston Byrne, a Washington, D.C.-based attorney who specializes in the blockchain technology used by digital currencies, told

Wyoming’s more narrowly focused proposal would face more of a political than legal battle, said Rohan Grey, research director of the Digital Fiat Currency Institute, a San Francisco-based trade group that represents government bodies and financial institutions.

He told Politico that as the federal government gears up to more extensively regulate cryptocurrencies, Congress could simply pass a law banning the practice.

There is also concern among global financial regulators about displacing a national currency, which could undermine the ability of national governments and central banks to regulate the economy.

Partisan divides

While support and skepticism toward digital currency cuts across the political spectrum, partisan lines are appearing in Congress, reported. It detailed examples of Republicans in both the House and Senate having a more favorable approach toward innovative digital technology than Democrats and encouraging the Federal Reserve and Treasury Department to “take a friendlier stance toward Bitcoin so that China doesn’t get ahead in the sector.”

“Among the broader populace, however, partisan divisions aren’t so stark on the issue of cryptocurrency,” the article noted. “A recent Morning Consult poll found that 9 percent of Democrats and 9 percent of Republicans believe that there are too many cryptocurrency regulations. Conversely, 26 percent of Democrats and 19 percent of Republicans believe that there aren’t enough cryptocurrency regulations, a 7-point gap that Morning Consult characterizes as fairly narrow when it comes to opinions on financial laws.”

And some observers say it’s the support of that broader populace that supporters of the Wyoming and Arizona proposals want to capture, as media reports continue to cast a wary eye on the cryptocurrency craze.

Broad appeal might be difficult to garner in Arizona, where the cryptocurrency legislation is sponsored by Republican state Sen. Wendy Rogers, who was recently singled out by the Anti-Defamation League for her extremist views and racist rhetoric. But Wyoming’s proposal is backed by the Merchant Advisory Group, a trade group for retailers that includes giants such as Amazon, Walmart, and Home Depot. For retailers, part of the appeal would be convenience, said Wyoming Rep. Ocean Andrew, the sponsor of the bill.

He was quoted on the website, where columnist Shawn Ambrosino hopefully writes that debates over the bills like those in Wyoming and Arizona are what the cryptocurrency movement needs to go mainstream.

“Just like we saw with the cannabis market, the moment states start accepting these digital currencies as legal tenders,” he predicted, “it starts catching on like wildfire.” 

Contributing: Herb Scribner