Colorado is accepting crypto for tax payments — it could be a mess or a shining example

Colorado is now accepting crypto for tax payments — but if you choose to use that option, it could change the amount you owe.

Colorado is accepting crypto as payment for any taxes owed to the state as of Sept. 1. It was the result of a promise made earlier in the year by Colorado Governor Jared Polis, who has proven his commitment to establishing the state as pro-cryptocurrency.

Colorado isn’t the only U.S. state trying to incentivize cryptocurrency investment within its borders, as legislatures in Arizona, Wyoming and Utah have all previously introduced bills to accept tax payments in the form of digital currencies in varying degrees.

There is much to gain economically for states who embrace blockchain technology and the crypto sector. Savvy governments are beginning to pitch their locale as the next center of the crypto economy, hoping to attract new businesses and intelligent, young, wealthy constituents involved with crypto.

Taxpayers should be warned, however, of the tax consequences of making payments with crypto, as making such a payment is a taxable event that has the potential to further increase the amount of taxes one has to pay.

Let’s hope more states follow Colorado’s lead, but they should also learn from where Colorado’s initiative falls short. If states, in the future, want to find success in accepting crypto as payment, they need to understand the tax dilemma inherent to making payments with crypto and lean into the solution of accepting stablecoins as