Colorado’s summer experiment and the race to be the most crypto-friendly state

DENVER — Even for the skeptics, cryptocurrency has become hard to ignore, especially in Colorado.

It’s total transaction volume grew to 15.8 trillion in 2021, which is more than 500 percent from totals in 2020.

The question is no longer if it will be used in local state economies, but rather a matter of when. In Colorado, that historic step begins this summer.

The crypto showdown

By now, millions have seen the viral videos circulating social media showing average people making huge returns from investments in cryptocurrency, while others have lost it all.

It’s not a surprise. Cryptocurrency is a very volatile digital currency. It isn’t regulated by a central government or bank. Rather, it’s backed by an online distributed database known as the blockchain. Cryptocurrency holders can send the currency back and forth without an intermediary.

The value of cryptocurrency has continued to grow within the last decade, and it’s currently worth about two trillion dollars.

Crypto enthusiasts are quick to point out that inflation in the U.S. just reached a 40-year high, while the value of the dollar continues to decrease year after year.

“The point is, life is getting more expensive,” said Jarrett Abraham, the director of corporate development at SALT. “It’s getting more clear that sitting in dollars presents challenges. So people are looking for other vehicles to store their wealth across time and space.”

Colorado’s stride to lead the crypto race

While many local governments are questioning the applications, uses and future of cryptocurrency and blockchain technology, Governor Jared Polis has been at the forefront of positioning Colorado to be a model for the rest of the nation.

“We’ve been laying the groundwork to be a center of crypto innovation and blockchain innovation for a number of years,” Polis said during a speech back in February at EthDenver, the world’s largest blockchain technology and software development competition, located in Denver.

Polis launched the Congressional Blockchain Caucus in 2016, which serves as a platform where government can study blockchain technology and Congress’ role in its progress.

In 2019, Polis passed the Colorado Digital Token Act, which allows certain cryptocurrencies to have securities exemptions.

Now, the fruition of that groundwork Polis set forth is here.

“Colorado will become the first state to accept cryptocurrencies for payment of state taxes and fees,” Polis said.

That will be an option this summer, but how will that work exactly?

“Cryptocurrency does have volatility… we look at minimizing risk to the state,” said Mark Ferrandino, executive director of Colorado’s Department of Revenue. “Someone who would want to pay their taxes through cryptocurrency would go to an exchange, facilitate that payment through the exchange and then that exchange would convert the cryptocurrency into cash and then that cash would come into the state.”

Essentially, the state will not be holding cryptocurrency. Every tax payment made with cryptocurrency will be immediately converted into cash.

“It allows businesses or individuals who have cryptocurrency to be able to pay their taxes in a more seamless way,” Ferrandino said.

Attracting innovation and more business

Those who have already invested in cryptocurrency will tell you the state’s plan goes much further.

“You are now selling a product,” Abraham said. “You’re selling your jurisdiction, you’re selling it to entrepreneurs and capital and innovators so that they can build businesses there and impact the economy in a positive way.”

Abraham’s company allows people to put up their cryptocurrency as collateral in exchange for a loan.

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