Jack Dorsey, the founder of Square, recently advocated for the establishment of a de minimis tax exemption for small Bitcoin transactions to facilitate its acceptance in everyday commerce.

“We want Bitcoin to be everyday money ASAP,” Dorsey said on Wednesday, after the announcement that Square has integrated Bitcoin payment services into its systems for merchants.

Dorsey’s proposal caught the attention of Senator Cynthia Lummis from Wyoming, who had proposed a similar de minimis tax provision as part of a standalone crypto tax bill last July. This bill would exclude Bitcoin transactions valued below $300 from capital gains tax, with an annual cap of $5,000 on such exemptions.

Cynthia Lummis’ tweet Source: Cynthia Lummis

Currently, all Bitcoin transactions within the US are liable for capital gains tax. Should the tax be reinstated on small transactions, it limits the use of Bitcoin as an exchange medium. Advocates argue that tax exemptions could drive Bitcoin’s adaptation as a digital cash system envisioned by Satoshi Nakamoto’s whitepaper.

In October, the US Senate Committee on Finance convened to consider regulatory frameworks around cryptocurrency taxation amid discussions of a government shutdown. Lawrence Zlatkin from Coinbase urged lawmakers to institutionalize a de minimis tax exemption for crypto transactions up to $300, emphasizing its potential to boost retail payments with cryptocurrencies and retain innovation within the US.

Various countries offer favorable tax regulations for digital assets to attract investments, putting the US at a disadvantage against these pioneering jurisdictions.