Did you ever think about which states are the most crypto-friendly and how this can lead to consumer-driven innovation and financial independence? Or have you wondered whether Texas or any other state that might embrace the financial freedom of not being beholden to one single issuer of money could consider leaving the union and creating its own currency? I’ll explore these issues about the decentralization of money and identify some of the states that appear to be ahead of the crypto curve.
Inflation is at a 40-year high, and despite the ups and downs of crypto, it gives people more options for financial freedom. There’s a big crypto battle underway among the states to get their share of the crypto pie, so get ready for the fight!
The Rules, Laws, Opportunities, and Other Fun Facts
Now that I’ve got your attention, despite myths to the contrary, Texas can’t secede from the Union. However, it does have some options that aren’t available to other states. Although this is highly unlikely, through some obscure law, Texas could legally carve itself into up tofive different states. While the idea of a Texas “Brexit” is an interesting concept to ponder, I’d like to instead focus on these other “fun facts” about crypto:
Currency, crypto and taxes: Local or state currency can complement the national currency and this encourages spending within a local economy. However, unlike fiat money (which is considered legal tender), crypto may not be backed by the federal government. The US government can demand that taxes are paid in fiat money, which reinforces the credibility of fiat currency. Some states are moving to offering people more options that give crypto more clout, such as using it to pay taxes.
Crypto value and growth: While acknowledging that crypto is volatile, crypto assets and blockchain technology represent a great opportunity. It surpassed a $3 trillion market cap last November, up from $14 billion just five years prior. Although it’s currently way down from that peak, there’s no reason to believe that cryptocurrencies can’t bounce back when the U.S. economic outlook improves. In fact, about 16 percent of adults have invested in, traded, or used cryptocurrencies—something unimaginable a decade ago.
Crypto savings legislation: One of the most significant recent shifts that emphasizes the growth of crypto is the newly introduced Financial Freedom Act bill by Tommy Tuberville (R-AL), which he claims preserves investment freedom. It would prohibit the U.S. Department of Labor from issuing a regulation or guidance that limits the type of investments in a 401(k) plan. “The choice of what you invest your retirement savings in should be yours – not the government’s. The government-knows-best approach being pushed by the current administration runs counter to the values that made our country the most prosperous nation in history.”
Some of the organizations that support this act include Americans for Tax Reform, Heritage Foundation, Chamber of Digital Commerce, Blockchain Association, and Association for Digital Asset Markets.
A Look at Some of the Key Crypto-Friendly States
Wyoming – It all started in the cowboy state
Many people think of Wyoming as the crypto pioneer state, which is bolstering its economy with crypto. Wyoming’s Kraken Bank becamethe first digital currency business to receive a U.S. state banking charter. In addition, Wyoming has approved over 20 laws making it easier for crypto businesses to operate and crypto transactions are free from state taxes.
Wyoming also has a charter that enables banks focused on digital assets to make cash deposits and store or transfer bitcoins that can be traded on the Kraken exchange. Bank customers can even deposit any winnings into the bank after it is converted to cash. This enables them to put their converted bitcoin into an account without the use of a middleman.
Florida – The trailblazer and crypto hub
Florida is aggressively trying to make Miami into a crypto hub and to become to the crypto industry what Silicon Valley has been to technology. The city hosted the Bitcoin 2022 Conference, where thousands of crypto enthusiasts gathered. In real estate transactions, for example, new buildings in Miami are accepting digital tokens for deposits on condos.
In May, Florida Governor Ron DeSantis signed legislation, CS/HB 273 that defines and deregulates cryptocurrency for the state and will become effective in January 2023. The law amends financial regulations for money service businesses, defines “virtual currency,” and reduces restrictions on Florida’s crypto industry.
California – Where the money is
It’s not surprising that California, with 2,473 crypto ATMs and a high online interest in crypto, won the title of the most crypto-ready state according to research by Crypto Head. Most recently legislation was passed to explore opportunities to deploy blockchain technologies to address public-serving and emerging needs and identify opportunities to create a research and workforce environment to power innovation in blockchain technologies. Of course, unlike some of the other states on this list, the state income taxes in California are currently the highest in the nation, but it also has the fifth highest median household income.
Texas – The self-rulers
The Texas flag with its one star represents the go-it-alone, independent spirit that’s still a part of Texas culture. Texas doesn’t have state income tax, which allows crypto traders with high incomes to reduce their crypto tax bills. It’s also becoming a center for crypto mining and has low rates for electricity. Texas is offering a variety of financial incentives and workforce training for major mining operations that set up shop in the state.
Two key bills were passed and signed into law by Governor Greg Abbott, who tweeted in February 2022 that “The Lone Star State is poised to be a world leader in blockchain & cryptocurrency.” In addition, state-chartered banks in Texas have the authority to provide custody, or safekeeping, services for virtual currencies.
Colorado – The crypto poster child
__Colorado __passed various legislation similar to Wyoming's blockchain rules and there’s no turning back. In fact, Colorado is positioned to be a model for crypto, when it becomes the first state to accept cryptocurrencies for payment of state taxes and fees. Every tax payment in crypto will be immediately converted into cash. According to Mark Ferrandino, executive director of Colorado’s Department of Revenue, “Someone who would want to pay their taxes through cryptocurrency would go to an exchange, facilitate that payment through the exchange and then that exchange would convert the cryptocurrency into cash and then that cash would come into the state."
Nevada – Great for Innovators
Nevada was an early adopter of crypto technologies and passed a law in 2017 to “not tax blockchain or smart contracts while recognizing the validity of blockchain to validate records.”
Nevada, like some of the other crypto-friendly states, doesn’t have state income taxes, and the state is trying to attract more crypto businesses and investors.
Crypto is also a hot topic in the casinos and hotels, where many of them have added__bitcoin kiosks in their facilities__. What’s interesting is that there are also nearly an equal number of transactions used to turn cash into bitcoin. As a result, crypto is being used like cash.
States Shape Their Own Destiny
Inflation is high, crypto is becoming more mainstream, and some states are responding by embracing crypto and developing their own rules for digital assets. In fact, some bills are underway in various states to make crypto legal tender for settling public and private debts. This can include everything from paying taxes, DMV fees, permits, certificates, licenses, and more. “So far the federal government hasn’t directly responded as states decide on their own whether to declare cryptocurrencies legal tender,” according to a recent article in npr.org.
Although the federal government has recognized the power of crypto and recently issued an Executive Order to address the risks and harness the benefits, many states have proactively put policies in place or have taken action to pave the way for further crypto innovation and growth. As states build upon this path to financial freedom with today’s passion and the same fury that fueled the Gold Rush many years ago, they can offer the public more flexibility, choice, independence and opportunities.