Sebastian Sinclair

Looking to the future, policymakers in Arizona referred an <a href="https://www.azleg.gov/legtext/56leg/1R/bills/SCR1007P.pdf" target="_blank" rel="noreferrer noopener">amendment</a> to the state constitution in the Arizona State Legislature last week, seeking to exempt digital assets from property taxation.



Following its second reading on Jan. 23, the resolution now has a small shot of making it to a ballot initiative. If approved by a majority vote in the legislature and subsequently passed by voters, the amendment would make crypto tax-exempt at the state level.



It would also make it one of the more favorable states for tax purposes, alongside Wyoming, which passed a law <a href="https://blockworks.co/news/daos-favor-classic-tax-havens-passing-up-crypto-friendly-us-states">recognizing a DAO’s legal status</a> as akin to a limited liability company. 



Arizona had originally toyed with the idea of making <a href="https://blockworks.co/news/arizona-considers-making-bitcoin-legal-tender">bitcoin legal tender</a> early last year, but that bill was subsequently <a href="https://legiscan.com/AZ/text/SB1341/2022" target="_blank" rel="noreferrer noopener">shelved</a> shortly after being introduced.



On a federal level, all individuals are required to pay income and capital gains taxes, but individual US states approach taxation differently, with some eschewing the concept of capital gains or personal income tax altogether at the state level.



Income tax at the state level is triggered when a user produces additional income deriving from mining, staking or airdrops, while capital gains (or losses) are triggered when a cryptoasset is disposed of on the basis of its cost basis and sale price.



Aside from Arizona, here are four other “friendly” states based on regulatory and tax advantages ahead of the federal tax filing deadline come April 18.



<h3 class="wp-block-heading">Wyoming</h3>



Wyoming, long-viewed as one of the country’s most progressive crypto regions, does not collect personal or corporate income tax. The state also began regulating the industry early on by introducing a financial <a href="https://wyomingbankingdivision.wyo.gov/banks-and-trust-companies/financial-technology-sandbox" target="_blank" rel="noreferrer noopener">technology sandbox</a> for testing financial products and services.



As mentioned, it formally legalized DAOs in 2019, allowing for clearer guidelines on how those entities would be taxed. Typically, LLCs don’t pay taxes on business incomes, but instead, members are required to pay taxes on their share of the LLC&#8217;s profits.



The state also passed its <a href="https://blockworks.co/news/legal-expert-avanti-may-face-uphill-battle-getting-fed-payment-access">charter for banks</a> dealing in digital assets back in 2019 making it possible for crypto firms to both hold customer cash deposits and custody crypto — later able to be traded on exchanges.



High electricity prices have caused some crypto miners to balk at setting up shop in the state, though Wyoming has recently attempted to tackle the issue by introducing two bills that may result in bitcoin <a href="https://blockworks.co/news/pro-crypto-wyoming-not-yet-pro-enough-to-attract-bitcoin-miners">miners paying less</a>.



<h3 class="wp-block-heading">Texas</h3>



Like Wyoming, Texas allowed for <a href="https://www.dob.texas.gov/sites/default/files/files/news/Industrynotices/in2021-03.pdf" target="_blank" rel="noreferrer noopener">chartered banks</a> to custody digital assets in June 2021, which was viewed at the time as a way to tap into the state&#8217;s booming domestic crypto market. 



Coinciding with its cheap electricity — beneficial to crypto mining activity two years ago — the state also features no income tax.&nbsp; Still, Texas does not recognize crypto as legal money and instead is concerned with the asset class as a taxable commodity on a transactional basis.



The state does not require firms, such as exchanges, to obtain a money transmitter’s license. It also passed its <a href="https://freemanlaw.com/cryptocurrency/texas/" target="_blank" rel="noreferrer noopener">Texas Virtual Currency Bill</a> in 2021 which provides a legal definition of digital assets. There is no income tax in the state.



Miners too benefit from a favorable framework that was put in place for firms to profit from 10-year tax abatements and tax credits, alongside additional state training for their workforce.&nbsp;



<h3 class="wp-block-heading">Florida</h3>



Florida, like Wyoming and Texas, does not feature a state income tax.&nbsp;



The state has a number of high-profile politicians opting for local crypto and blockchain regulation, including Miami Mayor Francis Suarez, who previously pushed for city residents to <a href="https://www.newsweek.com/miami-passes-resolution-allow-paying-city-workers-bitcoin-attempt-woo-big-tech-1568784" target="_blank" rel="noreferrer noopener">receive their paychecks</a> and pay for their property taxes in bitcoin.



While the state’s governor <a href="https://blockworks.co/news/desantis-says-florida-should-be-willing-to-accept-taxes-in-crypto">Ron DeSantis floated the idea</a> of allowing businesses to pay taxes using crypto to Florida’s Legislature’s 2022 session, his proposed measures failed to pass. 



As such, the state currently does not address the sales and use tax treatment of transactions involving crypto though, like Wyoming, a money transmission license is not required courtesy of changes made to <a href="https://www.flsenate.gov/Session/Bill/2022/273" target="_blank" rel="noreferrer noopener">House Bill 273</a>.



<h3 class="wp-block-heading">Colorado</h3>



Colorado, unlike other states listed, does tax income at 4.55% including wages and salaries deriving from crypto activity.&nbsp;



The outlier here is that Colorado is attempting to position itself as a crypto-friendly state by ensuring broader digital asset use cases for tax purposes.



In September of last year, Colorado’s Department of Revenue <a href="https://blockworks.co/news/colorado-residents-can-now-pay-state-taxes-with-crypto-for-a-fee">began accepting crypto as an additional form of payment</a> for all resident taxpayers, becoming the first US state to do so.&nbsp;



That includes individual income tax, business income tax, sales and use tax, withholding tax, severance tax and excise fuel tax.



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These 5 Crypto-friendly US States Show Initiative on Tax Laws

Ben Strack

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 <ul>
 <li>Maple Finance “is the rails on which the lending business of the future will be running,” the CEO said</li>
 <li>Traditional asset managers are showing increased interest in lending to crypto miners</li>
 </ul>
 
</div>



Crypto lender Maple Finance has surpassed $1 billion in loans in relatively short order and is now looking to connect crypto mining borrowers with traditional asset managers willing to float voluminous loans.



The company offers undercollateralized lending infrastructure for institutional lenders and corporate borrowers.



Founded in May 2021, Maple hit the $1 billion mark in 10 months following its largest loan — $77.5 million — to digital assets quantitative trading firm Alameda Research.



“We are excited about the growth on the platform over the past year and we look forward to continuing to originate new loans with the Maple team,&#8221; an Alameda spokesperson told Blockworks in an email.&nbsp;



Sam Bankman-Fried, the CEO of crypto exchange FTX, founded Alameda in 2017 in an effort to provide liquidity via market-making to digital asset markets.



Maple <a href="https://www.maple.finance" target="_blank" rel="noreferrer noopener">aggregates loans</a> on behalf of large borrowers. Rather than a borrower negotiating deals and maintaining contact with a dozen prospective lenders, one entity assesses the borrower’s risk and manages a collateralized asset pool.



Maple CEO Sid Powell told Blockworks that the company’s pools provide an “evergreen source of capital.”&nbsp;



“Alameda doesn’t have to go and find those parties — the delegate does that,” Powell said. “And Alameda doesn’t have to manage individual relationships; they just have to have one point of contact.”



Institutions looking to source yield through lending often don’t know where to start, he added, saying many lack the crypto-native know-how to negotiate an annual percentage yield (APY) or lack the bandwidth to properly source counterparties.



<h3 class="wp-block-heading">The future of lending?</h3>



Maple “is the rails on which the lending business of the future will be running,” Powell said, because the startup offers a comparably low-cost way to gain exposure to the growing field of blockchain-based fixed-income products.



A high-performing underwriter or risk assessor at a company such as JPMorgan or Goldman Sachs can leverage their expertise and relationships to run a Maple pool, according to Powell.



“You don’t have to go out and raise $200 million by talking to 20 different institutions or family offices,” he said. “You can set up the next Genesis, Celsius or PIMCO yourself.”



Crypto lender <a href="https://cms.blockworks.co/celsius-dips-into-defi-delegating-30m-in-ether-on-maple-finance/" target="_blank" rel="noreferrer noopener">Celsius recently became</a> the first centralized finance institution to deploy its services on Maple. Celsius last month moved to issue and manage under-collateralized loans from a $30 million pool of wrapped ether (WETH) for the first time.



<h3 class="wp-block-heading">A future focus on miners</h3>



Maple Finance is targeting $5 billion in originated loans by the end of this year.



About $3 billion is projected to come from Maple’s existing business, while $1 billion would come from its Maple Solana offering, set to launch at the end of the month.



In January, Maple unveiled its bid to <a href="https://cms.blockworks.co/maple-finance-scoops-up-lending-protocol-avari-to-hasten-launch-on-solana/" target="_blank" rel="noreferrer noopener">acquire DeFi lending protocol Avari</a> to expedite the platform’s launch on the Solana blockchain. Daniel Kim, Maple’s head of capital markets, said at the time Solana “has uniquely captured the interest of the largest capital markets participants.”



The remaining projected $1 billion in loans is expected to come from institutions lending to miners. Traditional asset managers and banks — even if they’re reluctant to invest directly in crypto — are showing an increasing interest to act as a counterparty for such loans, Powell said, adding that there’s a particular appetite for US miners tapping renewable energy.&nbsp;



Maple is targeting a lending pool for miners, initially amounting to $100 million or $200 million, by the end of the second quarter.



“Because it’s the oldest crypto industry, it’s the one that most people are familiar with and one that we see some of the highest levels of appetite for,” Powell said.



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