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Tax-Free Bitcoin Zone Proposed by the USABTC

Crypto | Aug 8, 2024

USABTC - Tax-Free Bitcoin Zone Proposed by the USABTC

Image from USABTC website (USABTC.org)

Policy Group Advocates for a Bitcoin Tax-Free Digital Economic Zone (DEZ) in the United States

An advocacy policy group called the USABTC, is proposing that the U.S setup a Bitcoin tax-free Digital Economic Zone (DEZ) to protect the dollar's global dominance (during a time it's being challenged by BRICS) and promote economic growth.  So, they are advocating for no capital gains taxes on bitcoin transactions but there would be an 'exit tax' applied whenever Bitcoin is converted back into fiat, creating a revenue stream for the government's coffers in the absence of capital gains tax revenues.

The DEZ would also be open to international participants and includes measures to protect the right to self-custody of digital assets, addressing concerns within the cryptocurrency community.

See:  Record 2023 US Crypto Lobbying Expenditure

The DEZ would be implemented over several phases and in principle work like this:

  1. The President would issue a special order to launch the USABTC project. This directive would enable the government to purchase and trade Bitcoin through a designated fund called the "Exchange Stabilization Fund", which was established as part of the Gold Reserve Act in 1934.
  2. The IRS would help setup the rules of the DEZ, and then new laws would need to be passed that apply special tax treatments to Bitcoin transactions.
  3. The DEZ would operate on a layer 2 blockchain infrastructure with smart contracts handling all on/off ramps, transactions and conversions, thus ensuring tax compliance and asset security.
  4. A regulated DEZ would protect investors' money, build public trust, and maintain a stable system going forward.

Some Examples of Global Crypto Tax-Free Zones

1. El Salvador

In 2021, El Salvador took the world by storm and became the first country to recognize Bitcoin as legal money. In an effort to draw in foreign investment and smoothly incorporate Bitcoin into its economy, the country exempts foreign investors from paying taxes on Bitcoin held in its exchanges.

2. Puerto Rico

Puerto Rico is considered a US territory with independent tax laws.  Crypto investors who acquire digital assets while residing in Puerto Rico are exempt from capital gains taxes, making it an attractive destination for U.S. crypto investors looking for tax breaks.

3. United Arab Emirates

For businesses dealing in digital and virtual assets, the United Arab Emirates (UAE) provides a tax-free environment, especially through free zones like the Ras Al Khaimah (RAK) free zone. The UAE is a growing hotspot for blockchain and cryptocurrency companies because of these special zones, which allow 100% foreign ownership, no corporate or personal income taxes, and no customs fees.​

4. Switzerland

In Switzerland, known as 'Crypto Valley", private or individual crypto investors are exempt from crypto capital gains (not professional or self-employed traders, or businesses).  The country is still at the forefront of a favourable digital asset regulatory framework, and attracts several blockchain projects.

5. Germany

If a cryptocurrency is held for more than a year, Germany exempts it from capital gains tax. As a result, Germany is becoming a more desirable location for digital asset investors thanks to this policy, which promotes long-term investment perspective.

6. Malta

Known as "Blockchain Island," Malta does not tax bitcoin capital gains for non-professional traders. Despite the possibility of income tax on trades, businesses and investors in digital assets continue to benefit greatly from the general tax system.

Conclusion

Countries like El Salvador, Puerto Rico, the UAE, Switzerland, Germany, and Malta have established themselves as crypto tax havens.

See:  New US Crypto Tax Reporting Rules Starting 2025

The proposal for a U.S. Bitcoin tax-free zone called the DEZ, if implemented, might very well catapult America to forefront of the regulated crypto revolution (while maintaining the dollar's global dominance at the same time).

NCFA Jan 2018 resize - Tax-Free Bitcoin Zone Proposed by the USABTCThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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