There are many great things about the US, and the freedom each state has may be the best one of all. Crypto is booming and expanding, creating opportunities for those who wish to seize the moment, and there are states in the US that look favorably towards crypto and have thus made laws to accommodate crypto. Arizona is among the few who recognize the potential of crypto and is actively working to make it even better. You’ll find below several reasons why Arizona is where it is and how it became one of the safest havens for crypto in the US.
1. Arizona’s crypto tax policies
For any business, taxes remain a significant mark in their revenue. Death and taxes are the two constants, but Arizona is trying to change one of them. The state has found an easy way to boost its crypto trading and business by changing its tax policies against crypto. As such, it has lifted plenty of weight from the shoulders of crypto investors and businesses giving them more breathing room and opportunities to invest in crypto.
Anyone from Arizona who wishes to start investing in crypto can begin by choosing some of the cheapest crypto to buy. Eric Huffman says cheap crypto allows you to easily begin without hefty investments by using legitimate opportunities and maximizing your investment potential. Arizona applied a flat state income tax at 2.5%, with a 4.9% corporate tax in 2023, making it highly favorable for all who wish to invest in crypto.
But, perhaps one of the biggest and boldest invitations Arizona made is recognizing that airdrops are exempt from state-level taxation. While they are still taxable at a federal level, over which Arizona has no jurisdiction, it’s incredibly favorable for all crypto users that airdrops enjoy such a privileged status in Arizona.
2. Tax exemptions
To further boost its crypto scene, Arizona allows for several tax exemptions when working with crypto. Airdrops are one, but the list does not end there. Tax exemptions can attract investors and users from outside the state, as they signal a favorable stance towards a certain kind of business, in this case, crypto. To earn the title of the crypto-friendly state, Arizona does not address any sales or use tax of virtual currencies.
With this exemption, crypto users from Arizona have more funds to spend towards investing in crypto, playing on crypto gambling sites, expanding their crypto portfolio, or capitalizing on some of their available crypto assets. Any US taxpayer must report and pay federal taxes on its crypto transactions. That means that any selling, trading, swapping, etc, are taxable. Even income made from crypto mining, selling, and yield farming is regular income in the eyes of the IRS and is subjective from taxation.
Because many US states follow the guidance set by the IRS, two tiers of taxation can happen, one at the state and one at the federal level. But states like Arizona, which don’t specify how they tax virtual currency, can impose their laws at the state level, and thus create crypto heavens, like Arizona did. The duality of the US federal/state law system allows for such freedoms in tax regulations, which Arizona took, and made its successful crypto scene.
3. The “Arizona Blockchain and Smart Contract”
Seven years may have passed, but the impact of this law can still be felt throughout the US as it set a standard for others to follow. The full title of the HB 2417 bill is the “Arizona Blockchain and Smart Contract” law which made significant changes as to how Arizona views crypto and has formed its stance and current situation.
One of the most significant aspects of said law is that it clarified many key aspects of crypto, which was among the first at the time, following some states and being a standard for those to come. HB 2417 clarified the transactions related to all sales, leases, and crypto-related documents in its articles, and amended the Arizona Electronic Transactions Act (AETA). The crucial change that made HB 2417 replace AETA was that it clarified all electronic signatures, smart contracts, and records going through the blockchain and associated technology as an electronic form needing an electronic signature.
The bill also equalized the legal effects of smart contracts, making them equal to actual contracts, regardless of their form, thus raising them to the same legal ground. This law and similar are the reason why Arizona’s economy is booming and why 136 Arizona companies have made it to the Inc. 5000 list in 2024. Defining blockchain technology, smart contracts, and crypto assets in a legal bill may not seem as impressive now, but in 2017, when crypto was still in expansion, such laws made Arizona among the first and signaled its crypto future.
4. Crypto incentives
Arizona is no stranger to making big, bold moves regarding crypto. There were plans to make Bitcoin tenders a legal deal, but such a brash move is still early in development and has many stages before becoming a reality. But, should such a law pass, it would make Bitcoins a legal currency alongside the dollar in Arizona, but it will probably take time for such a groundbreaking law to pass. Any state that realizes how important it is to support small businesses is the one that looks toward the future.
Small businesses specializing in crypto mining or development need funds to get off the ground, as crypto tech is expensive and the market highly competitive. Arizona Angel Investment initiative aims to provide upstarting small businesses with means to begin and develop their business ideas. Besides funding, the initiative also eliminates Arizona’s capital tax gains in the investments made by said small businesses.
The Arizona BARC is a strong and ongoing platform between tech industry giant Intel and Arizona State University, nurturing the growth of many potential academic crypto pioneers. It provides a healthy basis for developing talents needed in the tech world and allows individuals to dive into the crypto scene, backed by some of the industry’s best companies. Crypto jobs can be lucrative, and employment in a constantly developing field has challenges.
The BARC initiative has already brought many companies, besides giants like Intel, to Arizona, to employ local rising talent and ensure they stay in Arizona and continue their professional tech careers there. Because Arizona recognizes the legal validity of blockchain and anything related to it, such a stance boosts the invocation and usage of blockchain in its industries.
By being a state following modern development and giving credibility to crypto, it shows that such actions are favorable and deemed worthwhile to make. In an extremely volatile crypto market, any assurance or backup is greatly appreciated, which is why Arizona became an attractive state for crypto investors and pioneers.
As time goes on, states that haven’t followed in Arizona’s footsteps can only take drastic actions to keep up, but few could succeed as Arizona. Crypto will only grow and spread to each part of our lives, digital or physical. Because crypto has such potential, governments must acknowledge it, the sooner, the better, and make it part of our reality. With legal support, regulations, and nurturing programs, Arizona will become a shining example of a future crypto state.
