Two US states are set to allow tax payments in cryptocurrencies in a few months. Colorado and Utah are reconsidering allowing tax payments in cryptos despite a massive fall in the crypto market.
Colorado and Utah's revenue departments are creating programs that will allow individuals and businesses to pay their taxes in digital currencies.
States Could Face Major Hurdles
The states will accept tax payments in Ethereum, Bitcoin, Dogecoin and other cryptocurrencies in a few months. But it won't be easy for the states to launch these programs easily as there would be some major challenges.
Massive Fall In Crypto Market
The move came as the crypto market is witnessing a massive crash as almost all of the digital currencies have lost their half of value in the past six months.
Bitcoin is currently trading at $20,231 on Wednesday while six months back in January it was valued at $43,000. Similarly, Ethereum is currently trading at $1,148 while six months back in January it was trading at $3,181.
Experts Warn State Treasuries And Taxpayers
But some experts have warned that these initiatives can put state treasuries and taxpayers at risk.
Lee Reiners, executive director of Duke University's Global Financial Markets Center, told Bloomberg that anything involving crypto is less appealing in the wake of the massive volatility we've seen over the last month, and frankly the last six months.
Reiners also went on to say that while a half-dozen states have considered following the lead of Colorado and Utah, a chorus of fiscal watchdogs, academics and crypto skeptics is now warning lawmakers against initiatives that might put state treasuries and taxpayers at risk.
Utah has finalized the launch of the program as it enacted a new law that allows the government to receive tax payments in digital currencies.
According to CryptoSlate, The new rules will be effective as of January 1, 2023. Tax payments collected in crypto will be converted to US dollars immediately using a third-party payment gateway before they are remitted to the state. Similarly, Colorado is also planning to launch a similar program and it will use a payment gateway to quickly exchange crypto payments for U.S. dollars before sending them to the state.