A Cato Institute policy scholar is calling for the elimination of capital gains taxes on Bitcoin and other cryptocurrencies to foster greater currency competition.
Nicholas Anthony, a research fellow at the Cato Institute, argued in a report that the capital gains tax (CGT) discourages the use of alternative currencies by incentivizing long-term holding and imposing heavy reporting burdens. He said the simplest solution would be to end capital gains taxes entirely, though a narrower option would be to exempt crypto and foreign currency transactions so “competition [can] 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,” Anthony 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.”
Anthony highlighted that spending crypto can trigger taxable events because current rules treat cryptocurrencies like other capital assets—stocks, property, and the like. That classification means everyday purchases using Bitcoin may create capital gains liabilities and onerous recordkeeping requirements.
He proposed several alternatives: abolishing CGT altogether; exempting CGT for purchases of goods and services (while warning that requiring proof of such transactions could create its own compliance nightmare); or adopting a de minimis approach where CGT applies only above a set threshold.
“Imagine every swipe of your card turning into a tax form. That’s what happens when spending Bitcoin,” Anthony tweeted, noting that buying a coffee with Bitcoin can subject a person to both sales taxes and capital gains reporting, potentially ballooning tax filings into dozens of pages.
Anthony said simplifying the tax code would reduce taxpayer stress and help create a more competitive economy. The Cato Institute, a public policy think tank, has previously testified before lawmakers on crypto-related issues.
Data cited alongside the proposal underscores growing real-world crypto use: a 2025 National Cryptocurrency Association survey found 39% of U.S. crypto holders reported using crypto to buy goods and services, and research using BTC Map data identified roughly 11,000 merchants worldwide accepting Bitcoin.
Anthony concluded that reducing or removing CGT on crypto transactions would “take the government’s thumb off the scale” and allow market competition to determine which forms of money succeed.