US Proposes Bitcoin Tax-Free Digital Economic Zone to Boost Digital Economy

A new proposal in the United States aims to establish a Bitcoin tax-free Digital Economic Zone (DEZ) to position the country as a leader in the digital economy. Spearheaded by the USABTC policy group, this initiative allows Bitcoin to be traded and accumulated without capital gains taxes, while imposing a tax on redemption. The USABTC argues that this DEZ could secure the financial future of the US by fostering an innovative economic environment that leverages Bitcoin's potential while maintaining the dollar's central role. The proposal emphasizes that an outright government purchase of Bitcoin is unfeasible and politically untenable, thus advocating for tax-free transactions within the zone to attract investors and promote wealth growth. The initiative also suggests that an exit tax on Bitcoin conversions back to traditional currency could create a new revenue stream for both federal and state treasuries. A pegged Bitcoin system on a layer-2 solution is envisioned to ensure efficient and secure transactions. The proposal outlines a phased implementation approach beginning with an executive directive from the President to authorize the use of the Exchange Stabilization Fund (ESF). This would be followed by drafting legal opinions, legislative efforts, and public outreach to gain support. The Internal Revenue Service (IRS) would collaborate to establish a robust legal framework for the tax structure. If successful, this initiative could significantly enhance the US's position in the digital economy while protecting the right to self-custody, addressing concerns within the cryptocurrency community. The implementation phases are set to begin in 2025, with the DEZ potentially operational by 2026.