TLDR
- Square integrated Bitcoin payment services on October 9, 2025, offering zero fees for merchants through 2026
- Jack Dorsey called for de minimis tax exemption on small Bitcoin transactions to enable everyday cryptocurrency use
- Current IRS rules require capital gains reporting on all Bitcoin transactions, even small purchases
- Senator Cynthia Lummis proposed Senate Bill 2207 exempting Bitcoin transactions under $300 from capital gains tax
- International competitors like UAE, Germany, and Portugal already offer favorable cryptocurrency tax policies
Jack Dorsey announced on October 9 that Square has integrated Bitcoin payment capabilities for merchants. The payment company will charge no fees for Bitcoin transactions through 2026. Dorsey used the announcement to call for changes to US cryptocurrency tax policy.
The Square founder posted that America needs a de minimis tax exemption for everyday Bitcoin transactions. He stated the goal is to make Bitcoin everyday money as soon as possible. The comments came as Square rolled out Bitcoin payment options across its checkout and point-of-sale systems.
Current US tax law treats Bitcoin as property rather than currency. This classification creates problems for anyone wanting to use Bitcoin for regular purchases. Every Bitcoin transaction requires capital gains tax reporting, even buying coffee or groceries.
When someone uses Bitcoin to make a purchase, they must calculate whether the cryptocurrency increased in value since they bought it. If it did, they owe capital gains tax. This applies to transactions of any size.
Short-term capital gains tax rates range from 10% to 37% for assets held under one year. Long-term rates are 0%, 15%, or 20% depending on income. The reporting requirement makes Bitcoin impractical for daily spending.
Senate Bill Targets Bitcoin Tax Burden
Senator Cynthia Lummis introduced Senate Bill 2207 in July to address the problem. The legislation would exempt Bitcoin transactions of $300 or less from capital gains tax. The bill includes a $5,000 annual exemption cap.
Lummis shared the proposal on social media after Dorsey’s comments. She posted an image of the bill with text suggesting this was the solution to the problem Dorsey identified.
Coinbase executive Lawrence Zlatkin testified before the Senate Finance Committee in October. He asked lawmakers to codify a de minimis tax exemption for crypto transactions up to $300. Zlatkin argued the change would encourage cryptocurrency payments in retail and keep payment innovation in the United States.
US Faces International Competition
Other countries have implemented favorable cryptocurrency tax policies. The United Arab Emirates, Germany, and Portugal offer tax treatments designed to attract crypto businesses and investment. These policies give those countries a competitive edge in the digital asset space.
US states also vary in their approach to cryptocurrency taxation. California, New York, and Hawaii impose combined tax rates above 10% for high earners. Florida, Texas, Wyoming, Nevada, and South Dakota have no state income tax on crypto.
Washington State charges a 7% excise tax on long-term capital gains exceeding $250,000. This includes cryptocurrency holdings despite the state having no general income tax.
The partial government shutdown has delayed cryptocurrency legislation. Senate Banking Committee members are drafting a digital asset bill to define oversight between the SEC and CFTC. The lack of agency staff to provide technical guidance has slowed progress on the legislation.
Bitcoin was trading at $121,025 on October 9, down 1% as investors awaited comments from Federal Reserve Chair Jerome Powell.
