A recent report by the Cornell Brooks School Tech Policy Institute (BTPI) indicates that introducing a de minimis tax exemption for small bitcoin and cryptocurrency payments in the United States could generate up to $2.58 billion in net revenue over a 10-year period.
Under S. 2207, a bill introduced by Senator Cynthia Lummis, purchases using bitcoin and other crypto assets under $300 would be exempt from capital gains tax, subject to a cap of $5,000 in excluded gains annually. The BTPI report's central scenario estimates a 10-year net revenue gain of approximately $859 million, with projections ranging from $172 million to $2.58 billion based on different scenarios.
The institute notes that these estimates assume the current base of 5.4 million digital-asset payment users, derived from 2024 Kansas City Fed estimates, remains unchanged over the decade. This projection contrasts with an estimate from Congress's Joint Committee on Taxation, which calculated a $600 million impact over 10 years for a broader bill addressing digital-asset lending, charitable contributions, mining, and staking income alongside payments.
According to the IRS, only 32% to 56% of U.S. crypto asset holders report gains. BTPI highlights that the current tax system discourages everyday spending due to capital gains taxes and complicated reporting processes. Data from crypto exchange Kraken illustrates this reporting burden, noting that the exchange issued over 56 million tax forms for digital asset transactions to the IRS in April alone, with nearly a third for transactions under $1, over half for $10 or less, and three-quarters for under $50.
By removing transaction-specific tax and reporting burdens, holders might be more inclined to spend appreciated assets. The BTPI report suggests that if qualifying payment volume doubles, the provision breaks even when approximately 10% of that increase represents new purchases, noting that every dollar of additional taxable activity generates roughly 16 cents in federal receipts.
Proponents argue that removing the friction of paying with bitcoin could encourage existing holders to use it for purchases, potentially increasing demand over the longer term. However, the report cautions that at current adoption levels, the effect on price and tax revenues is likely to be negligible in the near to medium term.
Other factors influencing bitcoin's potential as a medium of exchange include spending occasions, price volatility, consumer habits, payment rail positioning, and whether merchants choose to hold or sell the bitcoin they collect. G20 finance ministers and central bank governors recently recognized the transformative role of digital assets in supporting broad-based economic growth, suggesting that similar policy considerations could extend to other global economies.
