A bill was passed in the state of Arizona by a 16-13 margin which could enable taxpayers to use bitcoin and other cryptocurrencies in order to pay “tax and any interest and penalties” to the state’s Department of Revenue.
The measure has since been sent to the state’s House of Representatives for further consideration.
While the measure’s success is dependant on both approval in that chamber, as well as any possible settlement required if the House and Senate pass different versions, the successful vote forecasts that the law could come into place.
In January, lawmakers on the Senate’s Finance Committee cleared the bill by a 4-3 vote.
Arizona State Republican Jeff Weninger said the tax measure is aimed at making the state an accommodating place for users of the technology.
He said it was a signal to everyone in the US and throughout the world, that Arizona was going to be the place to be for blockchain and digital currency technology in the future.
Arizona state senator Steve Farley, a Democrat who is running for Governor, said, however, the bill puts the “volatility burden” of bitcoin’s price on taxpayers who make payments in US dollar.
He said: “It would mean that the money goes to the state and then the state has to take responsibility of how to exchange it.”
This comes after Bitcoin fell to one of its lowest points in two months on February 5, trading at $5,947.
Risks in the marketplace were high in early 2018 which lead to more interest from investors who saw a potential for big gains in cryptocurrencies.
But cryptocurrency expert Joon Ian Wong warned bitcoin could still be on track for further falls after experiencing dramatic plunges earlier this week.
He said: “Even the most ardent bitcoin supporter wouldn’t deny that it’s greatly inflated at the moment in terms of valuation.
“It’s come down a lot from the December highs but it’s still eight times higher than it was around 12 months ago.
“There’s an argument to be made that there is further to fall.”
Bitcoin’s current price has gained a very tidy 41 percent increase – $3,400 – from its earlier low but the northernly trajectory has flattened leading to fears that it was not a recovery but rather a temporary rebound from an extended decline.
Mr Wong added that despite the positive aspects of bitcoin and raving review from supporters, the cryptocurrency still fell behind traditional currencies like the dollar and the pound in regards to common use.
Speaking to the BBC Radio 4’s Today programme, he went on to add: “On the one hand bitcoin is kind of a digital gold, a store value.
“On the other hand, it’s a decent medium of exchange but not as good as the US dollar or the sterling.”
Bitcoin’s price may soon come under further regulation from the European Central Bank as concerns around cryptocurrencies grow among financial policymakers.
European Central Bank Executive Board member Yves Mersch said the central bank can no longer ignore the threats posed by cryptocurrencies to the “real world”.
He said: “If you increasingly have bridges between the virtual world and the real world and then there is a collapse in this virtual world, it could drain liquidity from the real world. This then becomes a concern for the central bank.
“We need more information.
“For me, one obligation would already be to force the unregulated platforms to report transactions in a harmonised way to repositories so that we would have access to information, also in order to create a better response.”