The bill would prevent crypto holders from using the US territory to avoid taxes on their digital assets
A new proposal in Washington is targeting a long-standing loophole that has made Puerto Rico an attractive destination for crypto investors seeking to reduce their tax bills. Rep. Nydia Velázquez of New York introduced a bill on April 21 that could limit the ability of digital asset holders to avoid federal taxes by relocating to the US territory.
The bill, named the Fair Taxation of Digital Assets in Puerto Rico Act, would amend the US island territory’s tax code and subject certain types of capital gains — including those from cryptocurrencies — to federal taxation. Velázquez argues that while some crypto investors have moved to Puerto Rico in hopes of benefiting from tax incentives, the influx has not produced the local economic improvements many hoped for.
Velázquez pointed out that the rise in digital wealth has increased housing prices, displaced residents, and worsened inequality in Puerto Rico, where nearly 40% of the population lives in poverty. She also warned that the US government stands to lose billions in potential tax revenue if current policies remain unchanged.
Puerto Rico became popular among investors after enacting Act 20 and Act 22, later rolled into Act 60, which provided favorable tax treatment for those relocating to the island. Influential figures in the crypto space, including Dan Morehead of Pantera Capital and Brock Pierce, have taken advantage of these rules. Under Act 60, investors could pay little to no tax on their capital gains, something not possible on the US mainland.
Velázquez’s bill faces an uphill battle in Congress, where the Republican-led House and Senate are unlikely to move quickly on legislation targeting crypto tax loopholes. Meanwhile, Puerto Rico’s governor has proposed extending Act 60 with a modest 4% tax rate on capital gains, far lower than what investors would pay elsewhere in the US.
