TLDR:
- Democratic lawmakers introduced a bill to make crypto investors in Puerto Rico subject to federal taxes
- The bill aims to close a loophole where qualified investors in Puerto Rico pay no local or federal capital gains taxes
- Puerto Rico may lose an estimated $4.5 billion in revenue from 2020 to 2026 due to tax breaks
- Puerto Rico’s Governor has proposed extending tax incentives through 2055 but adding a 4% capital gains tax
- The Democrat-led bill faces uncertain prospects in the Republican-controlled Congress
Democratic lawmakers have introduced new legislation aimed at preventing cryptocurrency investors from using Puerto Rico as a tax shelter.
The bill, titled the “Fair Taxation of Digital Assets in Puerto Rico Act of 2025,” was put forward on April 21 by New York Representative Nydia Velázquez and other Democratic colleagues.
The proposed law would amend the Internal Revenue Code to make digital asset income in Puerto Rico subject to federal tax rules. Currently, qualified investors living in the US Commonwealth are exempt from both local and federal taxes on capital gains, including cryptocurrency appreciation.
These tax breaks are part of a broader package of tax incentives known as Act 60. The program has attracted thousands of cryptocurrency enthusiasts to the island since its implementation.
Economic Impact on Puerto Rico
According to Rep. Velázquez, the influx of crypto investors has not benefited Puerto Rico’s recovery or strengthened the local economy. “Instead, it’s driven up housing costs, pushed out local residents, and added pressure to an island where nearly 40% of people live in poverty — all while costing the federal government billions in lost tax revenue,” she stated in comments to Bloomberg News.
Velázquez’s office estimates that Puerto Rico will lose approximately $4.5 billion in revenue from 2020 to 2026 due to tax breaks for wealthy investors. This comes at a time when the island continues to face economic challenges.
The bill aims to “close a critical loophole” in the tax code, with Velázquez emphasizing the importance of ensuring “everyone plays by the same rules.”
Competing Proposals and Industry Response
Earlier this month, Puerto Rico Governor Jenniffer González presented measures that would extend Act 60 benefits through 2055. However, her proposal would require new applicants for these incentives to pay a 4% tax on capital gains.
By comparison, cryptocurrency holders on the US mainland might pay as much as 20% on long-term capital gains and up to 37% on short-term gains, according to information from Velázquez’s office.
Supporters of the current tax incentives argue that these breaks attract high net-worth individuals with financial technology expertise to Puerto Rico.
The island has become home to several crypto industry figures, including Dan Morehead (founder of Pantera Capital), crypto advocate Brock Pierce, and social media personalities like Jake Paul and Logan Paul.
The legislation faces a challenging path forward. With Republicans controlling both the House and Senate, the Democrat-led bill may struggle to gain sufficient support for passage.
Congress is currently focused on extending the 2017 tax cuts and considering other crypto-related legislation. Both chambers are expected to vote on stablecoin regulations and a broader cryptocurrency regulatory framework in the coming months.
President Donald Trump’s administration has shown support for cryptocurrencies, with promises to reduce regulations affecting digital assets. This stance may further complicate efforts to pass legislation that would increase tax burdens on crypto investors.
