Colorado’s Crypto Tax Plan Flops

In September 2022, Colorado made headlines for becoming the first U.S. state to allow cryptocurrency tax payments under Governor Jared Polis. But two years later, the numbers are in  and they paint a picture of near-zero adoption.

According to data from the Colorado Department of Revenue, only $57,211 of the $11 billion collected in state income tax since 2022 has been paid using crypto. That’s a minuscule 0.0005%, or just 78 total crypto transactions across three years.

Let’s break it down:

• 2022: 8 payments totaling $16,426
  
   
• 2023: 22 payments totaling $23,241
  
   
• 2024 (so far): 48 payments totaling $17,544
  
   

Even though the number of transactions increased slightly, the actual amounts paid haven’t kept pace. And technically, Colorado doesn’t even receive cryptocurrency. Instead, the payments go through PayPal’s Cryptocurrencies Hub, which instantly converts digital assets like Bitcoin or Ethereum into U.S. dollars.

Bitcoin Isn’t Meant to Be Spent, Say Experts

Many crypto enthusiasts aren’t surprised by the slow adoption. Bitcoin, in particular, is seen less as a spending tool and more as digital gold  a long-term store of value.

“The one rule of Bitcoin is to never sell your Bitcoin,” said Lou Kerner, founder of the Web3 community CryptoMondays. “Why spend an asset that’s rising 100%+ per year?”

He’s not wrong. Since Colorado’s program launched in late 2022, Bitcoin’s price has surged by nearly 320%. It rose 30% in September 2023 and jumped 125% in September 2024 alone. Spending Bitcoin to pay taxes would have meant missing out on massive gains.

What About Stablecoins?

Some in the crypto community believe the future of crypto tax payments lies in stablecoins, not volatile assets like BTC. Since stablecoins are pegged to fiat currencies like the U.S. dollar, they offer the convenience of crypto without the wild price swings.

“Over time, stablecoins will emerge as the primary way people transact,” Kerner added. “They're just more efficient for everyone.”

Will Other States Follow?

So far, Utah is the only other U.S. state to allow cryptocurrency for tax payments. Like Colorado, Utah also uses PayPal’s conversion service. Louisiana, meanwhile, accepts crypto for fees and fines via Bead Pay.

The city of Detroit is next in line. Starting mid-2025, it will let residents pay taxes with digital currencies like Bitcoin and Ethereum. The goal? To establish Detroit as a tech-friendly and financially inclusive city, especially for underbanked residents.

Crypto Ownership Rising, But Use Still Limited

Despite the underwhelming tax data, crypto adoption in the U.S. remains on an upward trend. According to some estimates, one in five American voters has owned or used cryptocurrency at some point.

Still, ownership doesn’t always translate to usage  especially when that usage involves parting with a potentially appreciating asset. In simple terms: why spend Bitcoin today if it could be worth much more tomorrow?

Final Thoughts

Colorado’s experiment with crypto tax payments was bold  but the results show there’s little appetite to spend digital assets this way. With just 0.0005% of income taxes paid via crypto in over two years, it's clear most residents would rather hold than spend their coins.

As Bitcoin continues its bullish run, the idea of using it for everyday transactions like taxes remains a hard sell. The future of crypto payments may instead belong to stablecoins  digital dollars that won’t double in value overnight but make much more sense for actual payments.

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