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- A Cato Institute report says using Bitcoin for everyday payments in the US can trigger significant tax and reporting burdens.
- Researcher Nicholas Anthony said buying coffee with bitcoin every day could produce more than 70 pages of tax documentation.
Buying coffee with Bitcoin in the United States may sound like a simple test of digital money in everyday life. In practice, according to a new report from the Cato Institute, it can turn into a paperwork problem. argues
Nicholas Anthony, a researcher at the libertarian think tank, argues that the way the US tax code treats crypto assets such as Bitcoin makes routine spending far less workable than many advocates imagine. Because Bitcoin is generally categorized as a capital asset, using it to buy goods or services can trigger capital gains tax and a reporting obligation each time it is spent.
Daily Bitcoin payments still run into a tax wall
That is the core issue. If every small purchase potentially creates a taxable event, then Bitcoin starts behaving less like a currency and more like property being disposed of one transaction at a time.
Anthony said that makes compliance costs unnecessarily high and weakens the case for crypto as a usable medium of exchange. His example was deliberately ordinary. Someone buying coffee with Bitcoin every day, he said, could end up generating more than 70 pages of tax documentation.
The point is not only that the rules are annoying. It is that they distort how people use digital assets. A system that turns a low-value payment into a tax-tracking exercise discourages spending and nudges users back toward either holding or speculation.
The policy fix may be simpler than the politics
Anthony said the cleanest solution would be to abolish the capital gains tax entirely. That, obviously, is the biggest ask. He also floated narrower alternatives that may be easier to imagine politically, including removing capital gains tax on day-to-day payments involving crypto and foreign currencies, or creating a small transaction exemption for routine purchases.
That last idea has circulated before in Washington, but rarely with enough momentum to become law.
What the report underlines, though, is fairly plain. If policymakers say they want innovation in payments, then treating every coffee purchase like a miniature capital gains event makes that harder, not easier.
