Yearly revenue of around $158 million from cryptocurrency taxes proposed by NY lawmaker, as per reports.
New York State, a significant financial and tech hub, could potentially generate significant revenue from a 0.2% excise tax on cryptocurrency transactions, according to an estimate by Phil Steck, who chairs New York's Standing Committee on Alcoholism and Drug Abuse.
With a nominal GDP of approximately $2.297 trillion in 2024, New York is a significant player in the U.S. economy. Given the state's economic scale and its prominence in financial activities, it is likely that substantial cryptocurrency transactions take place within its borders.
While specific state-level cryptocurrency transaction volumes or dollar totals from Chainalysis data are not available, public Chainalysis reports estimate that U.S. cryptocurrency transaction volumes in recent years have been in the trillions of dollars annually. To estimate New York State’s share of these transactions, one method is to approximate it proportionally to its GDP share or financial market prominence.
Assuming New York State accounts for roughly the same percentage of crypto transaction volume nationally, if total U.S. crypto transaction volume were, for example, $10 trillion annually, the state's volume might be around $790 billion. At this volume, a 0.2% tax would generate approximately $1.58 billion.
However, it's important to note that this is a rough estimate because exact state-specific crypto transaction data from Chainalysis for 2022-2023 are not included in the search results. If more granular Chainalysis transaction data or New York-specific crypto market data were available, a more precise figure could be provided.
The potential tax revenue could contribute meaningfully to New York's budget, which faces shortfalls of around $750 million (current year) and $3 billion for FY2027. The tax revenue would be used to expand the substance abuse prevention and intervention program in schools in upstate New York.
In 2023, 33 out of every 100,000 New Yorkers lost their lives to drug overdoses, highlighting the need for increased funding in this area.
Phil Steck, the Assemblymember who introduced the legislation, also oversees the state's Office of Addiction Service and Supports, which serves over 730,000 individuals per year.
New York City hosts a growing number of crypto-native firms, including stablecoin issuer Circle, crypto exchange Gemini, and institutional firm Galaxy Digital. However, the memo written by Phil Steck highlights the vulnerability of the digital assets industry to fraud and scams, specifically mentioning Gemini as one of the companies accused of defrauding clients.
In 2023, Letitia James, the New York State Attorney General, brought a lawsuit against Gemini, bankrupt crypto lender Genesis, and crypto conglomerate Digital Currency Group for allegedly defrauding 230,000 investors out of more than $1 billion. The Attorney General recovered $50 million worth of digital assets from Gemini through a settlement last year.
Cryptocurrencies like Bitcoin are treated as cash equivalents for tax purposes in New York, among seven other states, including California. The tax revenue would be subject to capital gains tax, gift tax, and estate tax in New York.
The process of mining Bitcoin transactions consumes a large amount of energy, contributing to environmental impacts of cryptocurrencies. The scope of Steck's bill includes tax implications for NFTs, digital assets obtained through mining and staking, and stablecoins.
The proposed tax aims to generate $158 million annually to combat substance abuse in upstate New York. The New York Department of Financial Services supervised 845 million transactions across 20 total institutions in 2024, but did not include the dollar amount.
Decrypt reached out to Gemini for comment but did not receive a response. The process of mining Bitcoin transactions consumes a large amount of energy, contributing to environmental impacts of cryptocurrencies.
- Given New York's significant economic scale and prominent role in financial activities, it is likely that substantial cryptocurrency transactions occur within its borders.
- New York State may potentially generate a significant amount of revenue, approximately $1.58 billion annually, from a 0.2% excise tax on cryptocurrency transactions.
- This estimate is based on assuming New York State accounts for the same percentage of crypto transaction volume nationally as its share of GDP or financial market prominence.
- The potential tax revenue could contribute meaningfully to New York's budget, which faces shortfalls, with the funds intended for expanding the substance abuse prevention and intervention program in schools in upstate New York.
- Phil Steck, who chairs New York's Standing Committee on Alcoholism and Drug Abuse, introduced legislation proposing this tax, and he also oversees the state's Office of Addiction Service and Supports.
- New York City hosts several crypto-native firms, including Gemini, one of the companies accused of defrauding clients, according to a memo written by Phil Steck.
- The environmental impacts of cryptocurrencies, such as the energy-consuming process of mining Bitcoin transactions, are also under consideration in the proposed tax, which covers not only Bitcoin but also NFTs, digital assets obtained through mining and staking, and stablecoins.
