Cato Institute urges US to scrap crypto capital gains tax

Cato Institute urges the US to scrap capital gains taxes on crypto, arguing current rules hinder everyday use and currency competition. Proposals include full repeal or transaction-based exemptions.

The Cato Institute has urged the US government to eliminate capital gains taxes on Bitcoin and other cryptocurrencies. According to the think tank, the current tax system discourages the use of digital assets as money and stifles currency competition. Capital gains taxes, they argue, incentivize long-term holding and create significant reporting burdens, making everyday crypto transactions—like buying coffee—administratively challenging. Cato suggests that removing these taxes, or at least exempting crypto used in daily transactions, would help digital currencies function more like traditional money. Survey data cited by the Institute shows that 39% of US crypto holders used digital assets for purchases in 2025, and about 11,000 merchants worldwide accept Bitcoin. The proposals range from a full repeal of capital gains taxes to narrower exemptions for crypto and foreign currency use. As of April 2026, these recommendations remain policy proposals and have not been enacted into law.