- A bill has been introduced by Democrats to end federal crypto tax exemptions for Puerto Rico residents.
- The proposed law would apply standard U.S. tax rates to income from digital assets earned on the island.
- Lawmakers claim Act 60 has inflated housing costs while costing $4.5 billion in federal revenue.
Democrats in the U.S. House of Representatives have drafted a new bill to end Puerto Rico cryptocurrency tax benefits. The Puerto Rico Fair Taxation of Digital Assets Act of 2025, unveiled on Monday, aims to close a huge tax loophole according to lawmakers
Currently, under Act 60, investors who become bona fide residents of Puerto Rico are exempt from both local and federal capital gains taxes. These benefits have attracted a wave of wealthy cryptocurrency traders and entrepreneurs to the island.
Lawmakers Target Capital Gains Exemption
The bill was introduced by Representative Nydia Velazquez of New York, and several other Democratic lawmakers. A federal legislation aims to amend the Internal Revenue Code to tax the digital asset income generated by Puerto Rico-based digital assets according to federal guidelines.
In a statement, Velazquez criticized the influx of crypto investors, claiming the trend has worsened conditions for local residents. She said that the investors have inflated housing prices and displaced communities while contributing little to the local economy.
This comes after Puerto Rico’s government has extended the terms of Act 60 until 2055 in recent moves. The new proposal puts a new 4 percent capital gains tax on new applicants. But this rate is far below mainland U.S. rates, where they vary from 20% to 37% altogether, depending on the length of asset holding and income level.
Growing Tensions Over Economic Impact
The federal government may lose up to $4.5 billion in tax revenue between 2020 and 2026 according to Velazquez’s office due to Act 60 exemptions. San Juan is one place where the gap between those wealthy newcomers and local residents has grown increasingly visible.
The tax breaks have become a growing point of contention as almost 40 percent of Puerto Rico’s population lives below the poverty line. But critics say the tax benefits mainly benefit outside investors with little impact on building the overall base of economic growth.
Supporters of the current law say that the policy has attracted capital and technological expertise to the island. They say many of these investors would have taken their money to another country without such incentives. In recent years, prominent crypto figures, such as crypto advocate Brock Pierce, YouTube personality Jake Paul and Pantera Capital’s Dan Morehead, have moved to Puerto Rico.
Legislative Outlook and Political Challenges
The bill is unlikely to pass through Congress. Historically, Republican lawmakers have supported low tax frameworks and have had a lot of sway in tax policy. Likewise, President Donald Trump, who also recently has come out in support of the cryptocurrency sector, is unlikely to support a bill that tightens regulations.
Earlier this month, Trump reaffirmed his commitment to reducing crypto-related regulations. His administration has also proposed broader tax cuts, making it less likely that the House will prioritize Velazquez’s bill.
The Fair Taxation of Digital Assets Act will have to gain the bipartisan support to succeed. The bill is a signal of growing unease in Washington between promoting financial innovation with tax fairness and local economic effects.
The bill’s path remains uncertain. It has intensified the debate over the future of Act 60 and its role in Puerto Rico’s economy in regard crypto. Lawmakers will continue discussing the issue as they review other federal tax policies that relate to digital assets.
