Cato Institute calls for elimination of capital gains tax on cryptocurrency to boost market competitiveness
A Washington DC think tank contends that current capital gains tax requirements on digital currencies in the United States hamper their practical utility as a medium of exchange.
The Cato Institute, a Washington-based policy research organization, has made the case that the United States government ought to eliminate capital gains taxation on Bitcoin and alternative cryptocurrencies in order to facilitate greater competition among currencies.
According to Nicholas Anthony, who serves as a policy scholar and research fellow at the Cato Institute, capital gains tax (CGT) is hampering the adoption of alternative currencies such as Bitcoin (BTC) by creating incentives for extended holding periods while simultaneously imposing additional complexity on reporting obligations, as outlined in a report released on Wednesday.
Anthony's position is that the most straightforward approach would be the complete elimination of capital gains taxes; alternatively, another possibility would involve removing these taxes specifically for cryptocurrency and foreign currency transactions to "take the government's thumb off the scale and let competition be the true decider of the best money."
"Bitcoiners know the frustration of tax season all too well. It's never been easier to use Bitcoin as money," he said. "Yet, at the same time, the tax code puts an incredible burden on law-abiding citizens. Something as simple as buying a cup of coffee every day with Bitcoin can result in more than 100 pages of tax filings."
As a public policy research institution based in the United States, the Cato Institute seeks to shape policy decisions through published research and analytical reports. Representatives from the organization have previously appeared before legislative bodies to advocate for cryptocurrency-friendly policies.
Imagine every swipe of your card turning into a tax form. That's what happens when spending Bitcoin. If you buy a coffee with Bitcoin, the government makes you pay capital gains taxes on top of sales taxes. Spending Bitcoin daily can turn into 70 pages in tax filings.
Nick Anthony (@EconWithNick), April 15, 2026
No capital gains tax could create a more competitive economy
When cryptocurrency is utilized for purchasing goods and services, it can generate a taxable event in certain circumstances due to its classification within the same overarching category as stocks, real estate, and additional capital assets, as explained by the investment management firm VanEck.
Anthony proposed that an alternative solution might involve eliminating CGT solely for transactions involving the purchase of goods or services, though he cautions this approach "risks creating its own compliance nightmare if people are required to prove the transactions. That's better than being taxed, but the process would still be taxing."
Additionally, he referenced the concept of a de minimis tax as yet another potential pathway, under which CGT would only be activated when transactions exceed a predetermined threshold amount.
"The only thing worse than getting robbed would be having the robber demand endless forms about the money they are taking from you. Taxes are no different," Anthony said.
Congress should simplify the tax code so the average American can do what's required with ease. Doing so would go a long way toward easing Americans' stress each tax season and creating a more competitive economy.
Survey data from the National Cryptocurrency Association conducted in 2025 revealed that 39% of US crypto holders reported using crypto to purchase goods and services.
At the same time, Springer Nature, an academic publishing company, identified approximately 11,000 merchants worldwide using BTC Map data that currently accept Bitcoin as payment.