Empire State Crypto Cash: $158M Revenue Forecast

A bill aiming to create significant tax income from digital currency exchanges across New York was presented this past Wednesday by New York Assembly member Phil Steck.

With Assembly Bill A0966, New York State would initiate a 0.2% excise tax applied to cryptocurrency transactions. The money raised would be channeled towards supporting substance abuse prevention efforts in schools throughout upstate New York, an area heavily affected by the long-standing opioid crisis.

In a statement concerning the bill, provided to Decrypt on Friday, Steck predicted the proposed tax would bring in approximately $158 million yearly. He suggests this revenue comes from “crypto investors [who] are motivated mainly by the pursuit of rapid and immediate wealth.”

A description related to the legislation further elaborates, explaining that “The allocated funds are intended to broaden substance abuse prevention and treatment programs within upstate New York schools.”

Steck, who is a Democrat, leads New York’s Committee dedicated to Alcoholism and Drug Abuse. This Committee has supervisory responsibilities over the state’s Office of Addiction Service and Supports, an entity serving more than 730,000 individuals each year according to their annual report. This report highlights that, in 2023, 33 out of every 100,000 New York residents died from drug overdoses.

This legislative effort comes as other states are advancing crypto-based initiatives that are intended to support educational resources. For instance, Wyoming plans for revenues from its upcoming stablecoin’s reserves to be deposited into the state’s education funds.

According to Bloomberg Tax, as of 2023 New York, along with California and five other states, treat cryptocurrencies, such as Bitcoin, as cash equivalents for taxation. A more current guide on taxes from Bitwave, a cryptocurrency accounting software provider, indicates that digital assets in New York are, like other asset types, currently subject to capital gains, gift and inheritance taxes.

Steck’s bill, as currently written, is broad in scope, potentially impacting NFTs, digital assets gained via mining and staking practices, as well as stablecoins.

According to Steck’s report, the New York Department of Financial Services, which uses its BitLicense system to regulate crypto companies, did not provide information about the total volume of crypto transactions. In a quarterly overview, the regulator mentioned it oversees 845 million transactions across 20 establishments in 2024, however the sum in dollars was not included.

Since that data likely did not capture all crypto transactions made by residents, Steck developed an alternative estimation method. He referenced figures presented by Chainalysis, a crypto analytics company, which indicated that approximately $1 trillion in cryptocurrency was dispatched to the U.S. between July of 2022 and June of 2023. Steck subsequently adjusted this amount using New York’s 2024 share of the U.S. GDP, arriving at a figure of $79 billion.

The number may, however, be even greater given that New York City is a worldwide hub for finance, and is home to an increasing number of crypto-based businesses like stablecoin creator Circle, crypto exchange Gemini, and institutional firm Galaxy Digital.

In his statement, Steck emphasized the scrutiny faced by the digital asset space after crypto exchange FTX collapsed in 2022, describing the area as particularly “vulnerable to scams and fraud.” The statement identifies Gemini, among others, as one of the businesses that was accused of defrauding clients.

Decrypt contacted Gemini to get their take, but we did not get a reply.

Last year, New York State Attorney General Letitia James secured $50 million in crypto assets from Gemini in a settlement. This came after the exchange was accused of deceiving investors on the risks involved with its Earn platform.

In 2023, James filed a lawsuit against Gemini, the bankrupt crypto lender Genesis, and the Digital Currency Group for allegedly defrauding 230,000 investors, costing them over $1 billion.

Steck’s announcement also draws attention to the significant electricity requirements of computers involved in mining, a process used to verify Bitcoin transactions. He described the ecological impacts of cryptocurrencies as “another notable disadvantage.”