State legislators pushing through a bill that would allow Arizona residents to pay taxes through cryptocurrency
Newswise — Although known generally for conservative politics and practices, the Arizona Legislature is embracing innovation by welcoming cryptocurrency to its list of cutting-edge technologies.
Thanks to companies like Google/Waymo, LifeLock, Axon and Blackboard Learn, Arizona is a proven hot spot for innovators and entrepreneurs to start, expand and thrive. Now stepping further into the digital realm, Arizona lawmakers have passed a bill in the Senate to make cryptocurrencies such as Bitcoin and Dash an acceptable form of tax payment starting in 2020. The bill now heads to the House for consideration.
Question: Why do you think Arizona, a conservative state, has gone down this road?
Answer: Over the past few years Arizona has proactively engaged in becoming a favored partner for the new technologies, deliberately cultivating a live-lab testing environment in which technology innovations can be quickly tested for their latent business potential. This pragmatic approach holds the promise of generating a huge economic benefit to everyone. It is well known that Arizona attracted many autonomous car-driving companies by favoring business opportunities over heavy regulations, and we see the same scenario now being repeated with digital currency and blockchain technology in general. Consequently, Arizona and the Phoenix area in particular have emerged as a hot spot for blockchain service companies.
Q: How will this new development change the research in ASU’s Blockchain Research Lab?
A: This is a hugely positive development for BRL and blockchain-related activities at ASU in general. If the legislation is passed, it will further strengthen the mandate to initiate and perform first-class, quality research and innovations that enable efficient digital currency payment at scales comparable to conventional cashless payments. Furthermore … the demand for blockchain talent will grow exponentially, attracting new students to ASU and BRL to produce a new generation of blockchain application and business developers, and a cohort of blockchain-literate policy makers.
Q: What happens if the value of cryptocurrency changes between when you’ve filed your taxes to the time the state receives payment?
A: This is a small risk to bear for the current volumes of digital currency transactions, and potential economic development benefits outweigh the associated risks. As the volume of transactions grows, the value of digital currency is less prone to large daily changes, lowering the associated exchange risks.
Q: What kind of infrastructure changes will be needed on behalf of the state to start accepting payment, especially since it appears they’ll accept a range of cryptocurrencies?
A: The state will need to build a digital payment gateway to link its existing accounting and payment processing system to the digital currency networks will accept. To start, they will need a payment gateway toward Bitcoin, but the same principle can be used to design and operate payment gateways for other major digital currencies like Dash and Ethereum.
From a user-experience perspective, it can be very similar to the PayPal option we use when shopping online. Instead of PayPal it would be simply Bitcoin, Dash or something else.
Q: If this method is successful, do you think the IRS will follow suit one day?
A: As the volume of digital currency transactions grows, so will their acceptance increase. We are still in very early stages, and the financial regulatory framework will need to evolve in order to support acceptance of digital currencies. It might take a few years and input from early adopters like Arizona to design that framework, but once it is in place my expectation is that the IRS will start accepting digital currency payments as well.