U.S. Representative Warren Davidson (R-OH) introduced the Bitcoin for America Act in the House of Representatives. This legislation aims to modernize federal tax payments by allowing individuals and businesses to settle their tax obligations directly with Bitcoin (BTC).
Crucially, it would eliminate capital gains taxes on these transactions—treating BTC payments like foreign currency transfers—and direct all collected BTC into the U.S. Strategic Bitcoin Reserve, a national holding established by executive order earlier in the year.
The bill builds on President Donald Trump’s March 2025 executive order, which centralized about 200,000 BTC seized from criminal proceedings into a single federal reserve to prevent mismanagement across agencies.
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Davidson’s proposal shifts the reserve’s growth strategy from one-off seizures or budget allocations to a voluntary, market-driven inflow from taxpayers, positioning Bitcoin as a hedge against inflation and a tool for U.S. financial leadership.
Taxpayers can transfer BTC to the IRS at its fair market value on the transfer date, satisfying liabilities without triggering capital gains on BTC appreciation. This removes a major barrier under current IRS rules, where using BTC for payments is a taxable event.
Funding the Reserve
100% of BTC received goes into the Strategic Bitcoin Reserve, not general funds. Taxpayers could opt to allocate their BTC specifically to the reserve, bypassing uses like foreign aid.
Applies to federal taxes for individuals and corporations; no minimum or maximum amounts specified. The reserve grows organically without new spending, debt, or market purchases—avoiding price inflation from government buying.
Davidson argues the bill strengthens U.S. sovereignty in a world where nations like China and Russia are accumulating BTC. Bitcoin’s fixed supply (21 million cap) makes it an appreciating asset, unlike the inflationary dollar.
The Bitcoin Policy Institute (BPI) projects that if just 1% of federal taxes were paid in BTC from 2025–2030, the reserve could accumulate over 2.6 million BTC—valued at ~$230 billion at current prices—creating a “democratic” accumulation model.
Critics, however, worry it could incentivize over-reliance on seizures for reserve growth or complicate IRS enforcement. Supporters like BPI’s Conner Brown hail it as a “bottom-up” alternative to top-down mandates, such as Sen. Cynthia Lummis’s earlier $80 billion purchase proposal.
The bill is in early stages, with no co-sponsors announced yet. It faces hurdles in a divided Congress but aligns with growing pro-crypto momentum.
The Bitcoin for America Act could fundamentally alter U.S. fiscal dynamics by integrating Bitcoin—a deflationary asset with a fixed supply of 21 million coins—into federal revenue streams.
Proponents argue it positions Bitcoin as a hedge against dollar inflation, which has eroded purchasing power by over 20% since 2020. By directing BTC payments into the Strategic Bitcoin Reserve, the government could accumulate holdings without new spending or debt, potentially appreciating in value to offset fiscal deficits.
The Bitcoin Policy Institute (BPI) models that if 1% of federal taxes about $50 billion annually were paid in BTC from 2025–2030, the reserve could grow to over 2.6 million BTC, valued at ~$230 billion today, creating a self-sustaining asset base.
This “democratic” accumulation avoids market distortions from direct purchases, unlike proposals like Sen. Cynthia Lummis’s $80 billion buy plan. However, risks include BTC’s volatility: a 50% price drop could devalue the reserve by tens of billions, straining budgets if liquidated during downturns.
It might also reduce incentives for fiat-based economic activity, as taxpayers holding appreciated BTC could prefer it over dollars, potentially accelerating dollar depreciation. For small and medium enterprises (SMEs), it offers payment flexibility but introduces compliance costs for tracking BTC values.
Organic accumulation via voluntary taxes; appreciates as hedge against inflation. Volatility could lead to short-term losses; over-reliance on seizures if adoption lags. Budget-neutral; reduces debt dependency. Indirect pressure on dollar value; higher IRS processing costs.
Boosts BTC adoption without government buying pressure. Could inflate BTC prices if scaled, benefiting holders unevenly. A core innovation is exempting capital gains taxes on BTC-to-government transfers, treating them like foreign currency exchanges under IRC Section 988.
Currently, using BTC for payments triggers gains on appreciation e.g., buying at $10K and paying at $60K incurs ~$50K taxable gain. This exemption removes that barrier, incentivizing HODLers to pay taxes with BTC and potentially increasing compliance among crypto users.
Valuations would use fair market value at transfer time, simplifying reporting but requiring robust IRS oracles for accuracy.For taxpayers, this democratizes tax options, especially for the unbanked 13% of U.S. households, as BTC enables borderless, permissionless payments.
Businesses could deduct BTC costs more efficiently, but it raises equity concerns: Wealthier BTC holders benefit most from the exemption, while low-income filers might face tech barriers. Legally, it codifies the March 2025 executive order, mandating cold storage and multi-sig custody to prevent past agency losses of private keys.
Enforcement challenges include AML/KYC integration and state-federal alignment, as states like California tax crypto differently. Critics warn it could complicate audits, with inconsistent regs leading to disputes over “fair market value.”
By codifying the reserve, it shields holdings from agency silos, reducing forfeiture risks (e.g., Silk Road BTC losses). It aligns with Treasury’s easing on unrealized gains taxes, potentially paving for broader DeFi integration.
Legally, it invites challenges: Environmental groups might sue over BTC’s energy use proof-of-work consumes ~150 TWh/year, rivaling Argentina’s grid, while privacy advocates decry KYC mandates for transfers. It could preempt state bans, fostering uniformity but overriding local fiat preferences.
Overall, passage could accelerate BTC’s legitimacy, but failure reinforces regulatory silos. With no co-sponsors yet, its fate hinges on 2026 midterms.