A proposed US tax exemption for small bitcoin and crypto payments could generate an estimated $859m (£636m) in additional federal revenue over 10 years, while potentially increasing demand for bitcoin, according to a report from Cornell Brooks School Tech Policy Institute.
The report examined the possible impact of a so-called de minimis exemption, which would remove capital gains tax and reporting requirements from smaller digital-asset purchases. Its central estimate suggests a net revenue gain of about $859m, although the projected outcome ranges from a $172m loss to a $2.58bn gain depending on the assumptions used.
The research assumes the current number of digital-asset payment users remains unchanged over the next decade. That base is estimated at 5.4 million users, based on figures from the Kansas City Fed in 2024.
Under S. 2207, introduced by Senator Cynthia Lummis, bitcoin and crypto purchases worth less than $300 would be exempt from capital gains tax. The proposed relief would be limited to $5,000 in excluded gains each year.
Other measures being considered by US lawmakers would restrict the exemption to regulated stablecoins. The legislative debate remains unresolved.
Why the exemption is being considered
The Cornell Brooks School Tech Policy Institute, which is working with the Bitcoin Policy Institute on a separate study, said the current US tax rules discourage people from using crypto for everyday spending.
The Internal Revenue Service estimates that only 32% to 56% of US crypto-asset holders report their gains. Under the existing system, every payment can create a taxable event, requiring users to calculate and report the gain or loss on each transaction.
That burden is particularly significant for small purchases. In April, crypto exchange Kraken said it had issued more than 56 million tax forms required for reporting digital-asset transactions to the IRS. Nearly a third covered transactions worth less than $1, while more than half related to payments of $10 or less. Three out of four forms covered transactions below $50.
“The U.S. is an outlier in this respect. The UK, for instance, applies an annual capital gains allowance that effectively exempts small crypto transactions such as this from reporting. A targeted de minimis threshold wouldn’t be novel. It would just catch America up,” Kraken said in April.
Cornell’s estimate for the small-payment exemption is considerably higher than the assessment by the Joint Committee on Taxation, Congress’s official tax scorekeeper. It estimates that S. 2207 would raise about $600m over 10 years.
However, that figure covers the entire bill. As well as payments, the legislation addresses digital-asset lending, charitable donations, and income from mining and staking.
The Cornell report argues that removing the tax and administrative burden could lead to more spending, which would increase economic activity and ultimately generate additional tax receipts.
“Because the direct revenue loss from the exemption is relatively small, only a modest amount of genuinely new spending is needed to offset it. If qualifying payment volume doubles, the provision breaks even when roughly 10 percent of the increase represents new purchases,” the BPTI report said.
It added that each dollar of additional taxable activity generates roughly 16 cents in federal receipts.
The institute said people could be more willing to spend assets that have risen in value once the transaction-specific tax and reporting requirements were removed. They might also change whether they make a purchase at all, as well as which type of payment they choose.
Possible impact on bitcoin
If the exemption becomes law, Cornell’s findings could also point to a secondary benefit for bitcoin. Making bitcoin payments easier and less costly could encourage existing holders to spend their satoshis, while potentially increasing demand for bitcoin as a payment method.
That could eventually influence the price of bitcoin and help governments collect more capital gains tax from larger transactions and sales. In the short to medium term, however, the impact is likely to be limited because crypto payments remain relatively uncommon.
The longer-term effect could be greater. Stablecoins are increasing their share of the payments market, but bitcoin may offer advantages in privacy, security, cost, speed and resistance to censorship.
Major stablecoins are not genuinely global payment instruments, the report argues, because each is a liability of its issuing company, operates within a particular jurisdiction and remains closely connected to the existing financial system. Bitcoin, by contrast, sits outside those structures.
Regulators and the crypto industry will also need to establish how bitcoin transactions should be taxed in an increasingly “agentic economy”. Such an economy could rely heavily on automated systems and large numbers of microtransactions, potentially generating more economic activity.
The proposed exemption would be only one factor affecting demand. The availability of places to spend bitcoin, price volatility, consumer habits and the position of competing payment networks would also influence whether users chose bitcoin or a stablecoin.
The response of merchants would matter as well. If businesses that accept bitcoin immediately sell the coins they receive, the effect on demand could be smaller. If they retain them, that could contribute to the development of a circular bitcoin economy.
The precise effect of a de minimis exemption on bitcoin’s use as a medium of exchange remains uncertain. Cornell said it could nevertheless be one of several measures that support wider adoption.
Over time, greater adoption could make the bitcoin price less dependent on macroeconomic conditions, geopolitics and speculation, which are currently among its main drivers.
Although the Cornell study focused on the US, similar exemptions could have an even greater effect elsewhere. Many major economies impose value-added tax more extensively than the US, meaning that additional spending in euros, pounds, krona or yen could produce more revenue.
Finance ministers and central bank governors from G20 countries also recognised “the transformative role” of digital assets in supporting broad-based economic growth, as reported by Bitcoin.com News this month.
If the Cornell analysis is correct, easing the tax burden on small crypto purchases could support economies beyond the US by encouraging bitcoin holders to spend more. That could strengthen bitcoin’s role as money, increase demand and, in the longer term, provide support for its price.
A separate statement in the source material says only 14% of total global taxable onchain crypto-asset activity falls into a new global tax net, which becomes active.
