Rep. Nydia M. Velázquez, D-N.Y., introduced a bill Tuesday aimed at closing a cryptocurrency tax loophole in Puerto Rico.
According to a press release issued Tuesday, the Fair Taxation of Digital Assets in Puerto Rico Act would subject income derived from cryptocurrency staking, mining, or trading in Puerto Rico to federal taxation.
Under current law, individuals who live in Puerto Rico for at least six months may be able to exempt their crypto-based income from federal taxes.
Tax breaks for wealthy investors are projected cost Puerto Rico around $4.5 billion in revenue between 2020 and 2026, which may grow more as more crypto investors relocate to Puerto Rico, the release said.
"For years, some of the wealthiest U.S. investors in digital assets have used Puerto Rico to avoid paying federal taxes," Velázquez said in the release. "This influx has not brought promised economic growth, instead it has raised costs and driven displacement on an island where the poverty rate is already 40 percent. It’s about fairness. If you’re making money from digital assets, you should be paying your share — no matter your zip code."
Velázquez's push to close a crypto-based tax loophole comes amid broader efforts to end tax laws benefiting the wealthy in Puerto Rico. In October 2024, Velázquez co-led the United with Puerto Ricans Opposed to Act 22 Risks (UPROAR) Act, which seeks to change current federal tax rules that it claims enable millionaires and billionaires to avoid both local and federal taxes.
Velázquez, the first Puerto Rican woman elected to the U.S. House of Representatives, has served in Congress since 1993, according to her website.
Puerto Rico is an unincorporated U.S. territory with 3.2 million inhabitants who are American citizens and must pay federal taxes. In recent years, the island has emerged as a popular destination for crypto investors, thanks in large part to its favorable tax laws and active courting of the industry.
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