Colorado’s Crypto Tax Initiative Sees Limited Adoption
When Colorado began accepting cryptocurrency for tax payments in 2022, enthusiasts like Jeremy Frank were initially thrilled. Frank, Chief Technology Officer at Autonomys Network, was excited to pay his taxes with crypto “just to say I had.” However, his enthusiasm quickly turned to disappointment due to two major issues: the state government’s partnership with PayPal to convert funds into U.S. dollars, and a 2% fee for the service.
The Colorado crypto tax initiative, launched in 2022, aimed to capitalize on growing interest in digital assets and blockchain technology. However, the program’s results were muted, with Colorado collecting just $17,544 in digital assets in 2024 — down from $23,241 in 2023. This amount represented only 0.0005% of total tax payments last year, according to the Colorado Newsline.
Challenges in Crypto Tax Payments
Several factors contributed to the limited adoption of crypto tax payments in Colorado. The Colorado Department of Revenue did not directly accept digital assets; instead, it received funds in U.S. dollars after conversion by PayPal’s Cryptocurrencies Hub. This process required taxpayers to transfer their crypto from secure private wallets to centralized platforms, adding an extra layer of complexity.
Experts in the digital asset community are unsurprised by the limited uptake. “Paying taxes in crypto was never going to be mainstream — it’s a symbolic gesture, not a real use case,” said Mike Cahill, CEO of Douro Labs. “Most holders see crypto as a long-term asset, not a checking account.”
Other challenges include regulatory inertia and antiquated government payment systems. “You can’t just bolt crypto onto outdated government payment rails and expect adoption,” said Doug Colkitt, CEO of Crocodile Labs. “Until regulators create clear, purpose-built frameworks for digital assets, initiatives like these will remain symbolic rather than systemic.”
Future Prospects for Crypto Tax Payments
Despite current challenges, some see potential for crypto payments for taxes in the future. However, current tax implications of cryptocurrency use remain complex. “Crypto is best left held on to for an extended period of time, so as to not create an onerous tax situation,” said Kadan Stadelmann, Chief Technology Officer of Komodo Platform. “Using crypto for transactions, including paying taxes, can burden taxpayers with increased tax bills.”
As cities like Detroit roll out their own crypto tax payment programs in 2025, they may need to address the issues that limited Colorado’s program. Unless they include direct wallet integration or lower fees, crypto payments are likely to remain underutilized.
