A U.S. lawmaker has proposed legislation in the House of Representatives allowing citizens to settle federal taxes using Bitcoin. This initiative aims to direct Bitcoin payments into a national reserve.

Under the Bitcoin for America Act proposed by Representative Warren Davidson, a Republican from Ohio, any Bitcoin (BTC) paid as taxes would not incur capital gains taxes, thus not being recorded as a profit or loss for taxpayers.

In a press statement, Davidson emphasized:

“By allowing taxpayers to pay federal taxes in Bitcoin and having the proceeds placed into the Strategic Bitcoin Reserve, the nation will benefit by having a tangible asset that appreciates over time, unlike the US dollar, which has steadily lost value under inflationary pressures.”

The proposed legislation will enable the U.S. government to enhance its strategic BTC reserve without needing to buy Bitcoin from the market, thereby alleviating any potential positive impact on BTC prices due to purchases.

The suggestion follows U.S. President Donald Trump’s executive order earlier this year establishing a strategic BTC reserve, which didn’t mandate regular BTC acquisitions, instead insisting that all future additions should be financed through budget-neutral strategies.

Critics, such as journalist Lola Leetz, contend that funding this reserve through seized assets fosters undesirable incentives for the government. She remarked:

“Civil asset forfeiture should be reformed, not celebrated. If you are cheering this on, you should be ashamed of yourself.”

Conversely, Matt Hougan, from Bitwise, supports the initiative, asserting that the strategic reserve could reduce the likelihood of a government ban on Bitcoin, fostering wider acceptance of cryptocurrencies among nations wanting to maintain their global competitiveness.

This proposal and the impending conversations around it are expected to spark significant debate regarding federal tax policy and cryptocurrency regulation.