- PayPal converts crypto into US dollars before funds reach the state.
- Bitcoin’s rising value discourages users from spending it on taxes.
- Stablecoins may become the preferred method for future payments.
Since 2022, the State of Colorado has collected over $11 billion in income tax. Yet of that, only $57,211 has come from cryptocurrency payments. That is just 0.0005% of the total.
When Colorado became the first US state to accept crypto tax payments under Governor Jared Polis, the move was presented as a breakthrough for digital finance adoption.
But nearly two years later, figures provided to Colorado Newsline by the Department of Revenue suggest that uptake has remained negligible.
The data shows that while crypto ownership is rising across the United States, its use for tax obligations is far from mainstream.
Colorado residents can use PayPal’s Cryptocurrency Hub to pay in Bitcoin or other digital assets, which are instantly converted into US dollars before reaching the state treasury.
Despite the infrastructure being in place, only a handful of residents have opted in—and their reasons are more financial than technical.
Fewer than 80 payments
In 2022, only eight crypto-based tax payments were made in Colorado, totalling $16,426. That figure rose modestly in 2023 to 22 payments, amounting to $23,241.
In 2024, the number of transactions increased to 48, but the total paid declined to $17,544. Altogether, fewer than 80 payments have been recorded, with total crypto contributions stuck below $60,000.
None of this crypto is held by the state. All payments are instantly converted to fiat via PayPal’s system, meaning the Department of Revenue never touches digital assets directly.
That distinction matters: while Colorado is technically accepting crypto, it is functionally no different from accepting a card payment in dollars.
Store of value
Despite the small number of transactions, crypto ownership in the United States remains high. Around 20% of American voters have held or used crypto at some point.
But for most, coins like Bitcoin are not used to pay for goods or services—they are held as long-term investments.
That investment mindset is reinforced by Bitcoin’s performance. Since the start of Colorado’s crypto tax pilot in September 2022, the price of Bitcoin has surged more than 320%.
In September 2023, it posted a 30% annual gain, followed by another 125% in September 2024. With such returns, many holders are reluctant to spend their coins on tax bills, especially if doing so could trigger capital gains tax.
Stablecoin future
Colorado is not the only place experimenting with crypto-based public payments. Utah also allows tax payments via PayPal’s system. Detroit is planning to introduce the same model later this year.
Louisiana already accepts crypto payments for services and fines through Bead Pay.
Even so, experts remain sceptical about the long-term viability of using major cryptocurrencies for this purpose. Store-of-value assets like Bitcoin and Ethereum are ill-suited to everyday transactions, especially in volatile markets.
Industry voices suggest that stablecoins—digital tokens pegged to fiat currencies—may be the better fit for tax payments going forward.
Adoption remains symbolic
The Colorado example illustrates that offering crypto payments does not guarantee adoption. Many residents are unaware of the option, and even those who are often have little incentive to use it.
For now, crypto tax payment infrastructure may serve more as a political or technological signal than a practical alternative.
Still, the systems put in place could pave the way for broader adoption as the digital asset landscape matures. Whether that shift will be led by stablecoins, central bank digital currencies, or other innovations remains to be seen.
