Cato Institute Urges US to Eliminate Crypto Capital Gains Tax to Boost Utility

The Cato Institute has called for the US government to scrap capital gains taxes (CGT) on cryptocurrencies, arguing that the current tax framework prevents digital assets from functioning as a viable currency. The think tank suggests that removing these barriers would open the door for greater competition in the monetary space. Nicholas Anthony, a policy scholar at the institute, contends that treating crypto as a capital asset—similar to stocks or real estate—creates prohibitive reporting requirements. This structure incentivizes long-term hoarding rather than active spending, which Anthony argues effectively puts the government's thumb on the scale against alternative currencies. Anthony highlighted the administrative friction of daily transactions, noting that simple purchases, such as buying coffee with Bitcoin, can result in dozens of pages of tax filings for law-abiding citizens. To mitigate this, the institute suggests several paths: a total elimination of CGT, a specific exemption for the purchase of goods and services, or the implementation of a de minimis threshold where taxes are only triggered after a specific limit is met. The push comes as adoption grows; a 2025 National Cryptocurrency Association survey indicated that 39% of US crypto holders have used digital assets for payments. Additionally, data from Springer Nature identifies approximately 11,000 merchants globally that currently accept Bitcoin as payment. While the proposal aims to increase the velocity of Bitcoin and other tokens, any shift in US tax policy would require significant legislative action. For now, the proposal serves as a catalyst for the ongoing debate over the legal classification of digital assets and their role in the broader economy.