Tax Barriers with Collateral Basis: Why Is Bitcoin Still Difficult as a Payment Method?

The cryptocurrency industry continues to scramble for ways to make Bitcoin a viable everyday payment method. However, the biggest enemy is not technological limitations but tax policies that burden every small transaction. With increasingly strict collateral requirements for certain digital instruments, questions about the fairness of the crypto tax system are mounting.

Main Issue: Tax Rules Without Exemption Loopholes

Pierre Rochard, a board member of Bitcoin Strive, highlights a fundamental problem: the lack of de minimis tax exemption for small Bitcoin transactions. Currently, every BTC transaction, regardless of value, is subject to tax obligations. This creates an disproportionate administrative burden—imagine having to report a $2 transaction to buy coffee.

The Bitcoin Policy Institute, an advocacy organization focused on policy issues, expressed similar concerns at the end of 2025. They emphasized that taxing every digital asset transaction, no matter how small, transforms Bitcoin from “everyday money” into an investment instrument with high bureaucratic burdens.

Collateralized Stablecoins: Controversial Solution Facing Criticism

US lawmakers are considering a discriminatory approach: granting de minimis tax exemptions only for stablecoins backed by over-collateralization—namely, those secured with cash or short-term government securities. This proposal effectively creates a second-class system within the crypto market.

The Bitcoin community greeted this proposal with skepticism. They argue that restrictions favoring only fully collateralized stablecoins are unfair discrimination against other digital assets. Such provisions could worsen barriers to adopting Bitcoin as a payment tool.

Reform Proposal from Wyoming

In mid-2025, Wyoming Senator Cynthia Lummis, a prominent supporter of the crypto industry, introduced a more balanced bill. Her proposal includes a de minimis tax exemption for digital asset transactions valued at $300 or less, with an annual cap of $5,000 for the exemption.

Lummis’s proposal also features other interesting provisions: exemptions for cryptocurrency used in charitable donations, and deferred tax reporting for staking or mining income until the assets are actually sold. This approach reflects a deeper understanding of how Bitcoin users actually interact with their assets.

Industry Voices: Diverse Perspectives

Jack Dorsey, founder of Square, openly advocates for tax exemptions on small Bitcoin transactions. He emphasizes that Bitcoin needs to evolve into “everyday money” as quickly as possible—waiting for a perfect tax system is not an option.

Meanwhile, Marty Bent, Bitcoin advocate and founder of Truth for the Commoner media, takes a more critical stance. He argues that tax exemptions limited only to fully collateralized stablecoins are unreasonable and could jeopardize the entire crypto ecosystem.

This heated debate reveals a deeper dilemma: how to integrate digital assets into the existing financial system without creating biased collateral systems or burdening users with disproportionate tax costs. Wise and fair tax policies are key to unlocking Bitcoin’s potential as a future payment method.