"U.S. Democrats Introduce Puerto Rico Digital Asset Taxation Legislation"

# U.S. Lawmakers Push for Tax Reform on Digital Assets in Puerto Rico Democratic lawmakers in the United States have introduced a bill aimed at taxing income from digital assets in Puerto Rico, seeking to amend the tax benefits capitalized on by cryptocurrency investors in the region. As reported by Bloomberg on October 21, Representative Nydia Velázquez of New York has led the introduction of the “Puerto Rico Digital Asset Fair Taxation Act.” This proposed legislation aims to overhaul the current tax exemptions available to digital asset investors living in Puerto Rico. ## Tax Loophole Triggers Investor Influx Under the current laws, individuals recognized as bona fide residents of Puerto Rico are exempt from taxes on capital gains, including profits from digital asset transactions. It’s estimated that thousands of cryptocurrency millionaires have moved to Puerto Rico over the past decade to leverage these tax benefits. Velázquez and supporters of the legislation argue that the influx of cryptocurrency investors has adversely impacted local communities. Rather than boosting the local economy, the arrival of wealthy investors has reportedly led to a steep increase in housing costs, exacerbating Puerto Rico’s real estate market issues. “Instead of benefiting the local population, this surge of digital asset investors has driven up housing costs, displacing many local residents,” said Velázquez. She further noted that this influx has imposed additional strains on a territory where nearly 40 percent of the population lives below the poverty line, and it has resulted in billions of dollars in lost federal revenue. ## Billions in Revenue Loss, Escalating Inequality The Joint Committee on Taxation estimates that current tax incentives could cost the federal government about $4.5 billion in lost revenue from 2020 through 2026. The disparity is stark in cities like San Juan, where luxury real estate developments are booming, while many locals deal with rising rents and limited job prospects, intensifying economic inequality. Earlier this month, Puerto Rico’s recently elected Governor, Jenniffer González, proposed an amendment to Law 60, which governs the island’s tax incentives. The revision would extend the benefits through 2055 but introduce a 4 percent capital gains tax for new applicants. However, this rate is still significantly lower than the 20-to-37 percent capital gains tax applied on the U.S. mainland. ## Intensifying Debate Over Tax Policy’s Impact Supporters of the existing tax policy argue that it has successfully attracted crucial investment and innovation to Puerto Rico. They point out that wealthy newcomers have helped develop technology and financial sectors, creating jobs and modernizing the economy. Digital asset advocates warn that abolishing these tax benefits would push investors to relocate their capital elsewhere. Critics, however, argue that the majority of these benefits have been concentrated among a small, wealthy segment of the population, offering little to no advantage to the average Puerto Rican resident. ## Political Challenges Ahead Velázquez’s proposed legislation is likely to encounter considerable political obstacles. Historically, Republican lawmakers have supported tax cuts and are expected to view the bill as anti-digital assets, making bipartisan support doubtful. Complicating the issue is former President Donald Trump’s recent endorsement of digital assets. Trump has indicated plans to roll back regulations seen as restrictive to the cryptocurrency industry. As discussions continue, the future of Puerto Rico’s tax incentives for digital assets remains a contentious issue with significant implications for investors, local residents, and federal tax policy.