Why Tax Rules, Not Technology, Are Holding Bitcoin Back as a Payment Tool

In the US, Bitcoin is treated as property. That legal framing turns every BTC payment into a taxable event, forcing users to calculate gains and report transactions no matter how small. The result is predictable: people avoid spending Bitcoin altogether, not because it doesn’t work, but because it isn’t worth the compliance risk.

Key Takeaways

• Bitcoin’s main obstacle as a payment method is tax policy, not scaling or transaction speed
• Treating every BTC payment as a taxable event discourages real-world usage by design
• Momentum is building for small-transaction tax exemptions, but policy remains fragmented

A system people hesitate to use cannot compete with cash or cards, regardless of how advanced it becomes.

Tax friction changes behavior

Rochard argues that adoption depends on incentives, not ideology. If paying with Bitcoin exposes users to audits or penalties, they will simply opt out. He has rejected claims that Bitcoin payments remain weak even in low-tax jurisdictions, saying available data shows usage growing faster where enforcement is lighter.

The point, in his view, isn’t whether Bitcoin is technically superior. It’s whether people feel safe using it. Without that, Bitcoin remains stuck in a savings-only role.

Policy warnings and uneven treatment

That concern is increasingly shared by policy-focused groups. The Bitcoin Policy Institute recently warned that taxing every Bitcoin payment makes it structurally unsuitable for day-to-day use. Their conclusion was blunt: you can’t expect a currency to circulate if spending it is penalized.

The frustration has intensified as US regulators consider de minimis tax exemptions for stablecoins, while Bitcoin remains fully taxable. Critics argue this creates an uneven playing field, favoring dollar-linked tokens while keeping Bitcoin boxed in as a speculative asset.

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Legislative pressure is building

There are signs of movement. In 2025, Cynthia Lummis proposed exempting small digital asset transactions from federal taxes, explicitly targeting everyday payments rather than investment activity. The bill also aimed to defer taxes on mining and staking rewards until assets are sold.

Industry voices have echoed that push. After Square enabled Bitcoin payments, Jack Dorsey publicly called for tax relief on small BTC transactions, arguing that Bitcoin won’t function as money unless it’s allowed to behave like money.

At the state level, Rhode Island lawmakers are exploring limited tax exemptions for Bitcoin payments, framing the effort as a controlled experiment to normalize digital currency use without undermining tax collection.

The debate now centers on a simple question: should Bitcoin be taxed like property forever, or treated as a payment tool when used as one?

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