Bitcoin users in the United States who use it as a means of payment are being saddled with an excessive tax filing burden due to capital gains tax rules, an analysis said.

On April 15 local time, blockchain media outlet BeInCrypto reported that Nicholas Anthony, a researcher at the Cato Institute, said in a new analysis that the current tax system makes it effectively difficult to use bitcoin as money in the United States.

The key is that each purchase made with bitcoin is treated as a separate capital transaction. For each payment, users must record when they bought the bitcoin, when they used it, the original acquisition price and how much profit or loss was generated. This information must be reflected in IRS reporting Form 8949 and Schedule D attached to the individual income tax return, Form 1040.

Anthony said this structure is effectively not suited to routine payments. He pointed out that a user who buys a cup of coffee with bitcoin every day may have to prepare more than 100 pages of filing documents at year-end. Form 8949 alone could run about 70 pages based on daily transactions, he said.

He also said the tax structure weakens bitcoin’s function as a currency. Anthony said capital gains tax rates are designed to encourage long-term holding, and that such a policy encourages trading to reduce tax losses and distorts the market. He added that for currency, the distortion is bigger because policies that encourage long-term holding generally suppress behaviour regarded as ordinary currency use.

He also offered policy alternatives. The simplest approach would be to eliminate capital gains tax itself. A narrower alternative mentioned was to exclude cryptocurrencies and foreign currencies from capital gains tax. Anthony also cited the “Crypto Tax Fairness Act,” saying it is designed to introduce a small exemption for gains under $200. He added that the threshold is too low and should be raised to match average U.S. household spending of about $80,000.

Payment infrastructure is also moving faster than tax law. Square recently began offering fee-free bitcoin payments on merchant terminals. Self-custody wallets provided by Bull Bitcoin, Zeus and Trezor are also simplifying the process for consumer spending.

Ultimately, it has again been confirmed that constraints on the spread of bitcoin payments in the United States lie more in the tax system than in technology. Payment services are expanding the environment for everyday use, but as long as the tax system requires acquisition cost and profit-and-loss calculations for every transaction, wider real-world use of bitcoin will depend on whether the system is revised.