Why Bitcoin Hasn’t Become a Currency: Taxes Make Even Buying Coffee Impossible
Imagine having to file a multi-page tax return every time you pay for coffee with your card. That’s how cryptocurrency taxation works in the U.S.—and that’s precisely why Bitcoin still isn’t used as everyday money, despite all the promises.
Nicholas Anthony, an analyst at the influential Cato Institute research center, explains: every Bitcoin expenditure is treated as an "asset sale," making it a taxable event. This turns a simple purchase into a bureaucratic nightmare.
How Taxes Turn Bitcoin Into a Store of Value
To the U.S. Internal Revenue Service (IRS), Bitcoin isn’t currency—it’s an investment. So when you spend it on goods or services, you’re effectively "selling" an asset and must calculate your capital gain or loss. To do that, you need to know:
- When and at what price you bought those Bitcoins;
- The exact market price at the moment of payment;
- The difference between those two amounts.
If you use Bitcoin daily—for transit, meals, or subscriptions—you must report every single transaction. According to Anthony, annual reporting could run 70–100 pages. A single mistake risks penalties. As a result, people prefer simply holding BTC “in cold storage” and avoiding spending altogether.
It’s like if the dollars in your wallet changed value relative to themselves every day—and you had to calculate gains on every coin you dropped into a vending machine.
What Does the Cato Institute Propose?
Nicholas Anthony urges the U.S. Congress to simplify the rules. His key proposals:
- Fully eliminate capital gains tax on cryptocurrency payments—so spending Bitcoin is as straightforward as using cash.
- Or introduce a tax exemption threshold: waive reporting requirements for transactions with gains under $200 per transaction.
- Pass the Virtual Currency Tax Fairness Act, which would treat cryptocurrencies like foreign currency for everyday spending purposes.
Without such changes, he argues, Bitcoin will remain “digital gold”—a store of value, not a medium of exchange.
Real Attempts to Change the System
The idea isn’t new. Last year, Eric Trump stated that his father’s administration planned to eliminate capital gains tax for companies in blockchain, mining, and DeFi. While that proposal targeted businesses—not individuals—it signals growing regulatory pressure.
Today, services already exist to simplify crypto payments: wallets like Bull Bitcoin, Zeus, Trezor, and the Block (formerly Square) payment platform. But as long as the tax system demands every user act as their own accountant, mass adoption remains impossible.
As Anthony puts it: “The only thing worse than being robbed is when the robber forces you to endlessly fill out paperwork about the money they’re taking from you.”
Key Takeaways
- In the U.S., every Bitcoin expenditure counts as a taxable event.
- Annual reporting can span dozens of pages—deterring users.
- The Cato Institute proposes eliminating capital gains tax for everyday payments.
- An alternative is setting a de minimis threshold ($200) for small transactions.
- Without reform, Bitcoin will stay an investment—not a currency.
What This Means for Ordinary People
Even if you don’t live in the U.S., this issue matters. The American market sets global standards: if the world’s largest economy makes using cryptocurrencies for daily life practically impossible, other countries may follow suit. Until tax rules become simpler, Bitcoin will remain “digital gold”—great for saving, but useless in your wallet. And the real revolution in money won’t begin until paying for coffee with cryptocurrency is just as easy as handing over paper bills.
— Editorial Team
