Representatives of the Bitcoin Policy Institute (BPI), a nonprofit Bitcoin advocacy organization, warned that US lawmakers haven’t provided a de minimis tax exemption for Bitcoin transactions below a certain threshold.
“The de minimis tax code may very well be limited to stablecoins only, leaving on a regular basis Bitcoin transactions outside the exemption,” Conner Brown, BPI’s head of strategy, said on X, adding that the choice to exclude Bitcoin (BTC) was a “fatal mistake.”
In July, Wyoming Senator Cynthia Lummis introduced a bill proposing a de minimis tax exemption for crypto transactions of $300 or less, with an annual limit of $5,000 on tax-free transactions and sales.
The proposed law also included tax exemptions for digital assets used for charitable donations, in addition to a tax deferral for cryptocurrencies acquired through mining proof-of-work (PoW) protocols or stakes securing blockchain networks.
Granting a tax exemption to small Bitcoin transactions would increase its use as a medium of exchange relatively than simply a store of value and enable a brand new economic system built on a Bitcoin standard, BTC proponents say.
Source: Conner Brown
The debate over de minimis tax exemptions has also raised the query of whether such relief should apply to stablecoins designed to keep up stable value.
“Why do you even need a de minimis tax exemption for stablecoins,” wrote Marty Bent, founding father of media company Truth for The Commoner (TFTC), on X. “They don't change their value. That's nonsensical.”
Cointelegraph reached out to BPI regarding the proposed laws but had not received a response on the time of publication.
Bitcoin is increasing in value, but isn’t used as peer-to-peer electronic money
The Bitcoin white paper, written in 2019 by its pseudonymous creator Satoshi Nakamoto, describes Bitcoin as a “peer-to-peer e-cash system.”
However, relatively high transaction fees, average block times of around 10 minutes, and capital gains taxes on Bitcoin make it difficult to make use of BTC as a payment method for goods and services.
Many Bitcoin investors decide to hold BTC for the long run, sometimes borrowing fiat currency against their BTC holdings to pay expenses and fund on a regular basis purchases.
The Bitcoin white paper was published by Satoshi Nakamoto in 2009. Source: Satoshi Nakamoto Institute
The Bitcoin Lightning Network is a second-layer protocol for BTC payments by which a specific amount of BTC is locked in a payment channel between two or more people.
Users connected through a payment channel can conduct multiple transactions off-chain, with only the ultimate net balance recorded on the Bitcoin ledger for settlement once the channel closes.
This makes Bitcoin transactions faster and cheaper because users within the payment channel should not have to attend for brand spanking new blocks to be mined or pay a network fee for every transaction between parties within the channel.
