North Carolina Proposes Bill Allowing Crypto for Tax Payments

North Carolina lawmakers have introduced a bill that aims to allow citizens to use crypto assets for tax payments and other economic transactions. The bill, sponsored by State Representative Neal Jackson, is known as House Bill 920 and would be enacted as the North Carolina Digital Asset Freedom Act if passed. The legislation underscores the state's recognition of digital assets as a valid medium for economic exchange, provided they meet specific regulatory and operational criteria.

The bill outlines stringent requirements for crypto assets to be eligible for tax payments and other transactions. One of the key stipulations is that the digital asset must have a market capitalization of at least $750 billion and a daily trading volume exceeding $10 billion. Additionally, the asset must be listed on multiple regulated U.S. exchanges. Currently, Bitcoin (BTC) is the only major cryptocurrency that meets these criteria, with a market cap of $1.6 trillion and a daily trading volume of $45 billion. Ethereum (ETH), the second-largest cryptocurrency by market cap, does not meet these requirements, with a market cap of $188 billion and a daily trading volume of $20 billion.

Beyond market capitalization and trading volume, the bill mandates that eligible digital assets must have operated in an open, permissionless market for at least 10 years without external intervention or state support. The asset should also have been launched without pre-mining, insider allocations, or central authority control. Furthermore, the token must not rely on a single entity, foundation, or small group of insiders for its ongoing operation or governance. It must also be deemed a commodity and not a security token by U.S. regulators, such as the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission.

This legislation is part of a broader effort by North Carolina to integrate digital assets into its financial system. Recently, the state proposed two bills that would allow an independent investment authority to invest up to 5% of pension funds into digital assets, including cryptocurrencies, stablecoins, and NFTs. The introduction of the Digital Asset Freedom Act reflects a growing trend among lawmakers to embrace digital assets as a viable form of currency, positioning North Carolina as a forward-thinking state open to new technologies and financial innovations.

By recognizing the potential benefits of cryptocurrencies, North Carolina aims to simplify the tax collection process for individuals and businesses that hold these assets. This move could encourage more widespread adoption of digital currencies within the state, fostering innovation and economic growth. The bill's provisions could also provide a framework for other states considering similar legislation, potentially setting a precedent for broader acceptance of digital currencies in the United States. The introduction of this bill reflects a growing trend among lawmakers to embrace digital assets as a viable form of currency, positioning North Carolina as a forward-thinking state open to new technologies and financial innovations.