US Legislators Propose Ending Crypto Tax Incentives in Puerto Rico

Democratic lawmakers are advancing legislation aimed at eliminating tax benefits for cryptocurrency investors in Puerto Rico. The proposed bill seeks to close loopholes that currently allow crypto holders to avoid federal taxes by relocating to the territory. Critics argue the incentives disproportionately benefit wealthy individuals while depriving Puerto Rico of much-needed revenue. Supporters claim the measure will promote fairness in the tax system and prevent exploitation of territorial tax policies.

Lawmakers blame crypto investors for inflating living costs

The influx of crypto-investors has reportedly done more damage than good to the local Puerto Rico population, according to Velázquez and other lawmakers.

Instead of strengthening the economy, they say, an influx of rich crypto traders has inflated living costs, particularly in property markets.

“This wave of crypto investors hasn’t helped Puerto Rico’s recovery or strengthened the local economy,” Velazquez said.

According to her, it has only 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.

The Joint Committee on Taxation said that the tax breaks for investors will cause the federal government to lose an estimated $4.5 billion in revenue between 2020 and 2026.

The economic divide is becoming more apparent in cities such as San Juan, where the signs of luxury real estate developments have multiplied even as many local families cope with high rents and limited options for work.

Earlier this month, Puerto Rico’s new governor, Jenniffer González, proposed slightly tightening Act 60. Her proposal would keep the benefits in place until 2055 but would apply a 4% tax over new applicants’ capital gains — still far lower than the 20–37% rates that many crypto investors would pay on the mainland.

Crypto defenders struggle to preserve the breaks

Proponents of the existing tax regime say it has attracted much-needed investment and innovation to Puerto Rico. Rich newcomers, they say, are helping build a more robust technology and finance sector, create jobs, and modernize the island’s economy.

Crypto advocates say that without the tax breaks, these investors would have gone elsewhere with their money.

But critics are skeptical, noting that most benefits have gone to the wealthy, not to average Puerto Ricans.

The political road ahead for the bill appears murky. Republicans have historically favored lower taxes and seem unlikely to sign off on a piece of legislation they view as anti-crypto.

Adding another twist to the political poker game, President Donald Trump recently embraced cryptocurrencies. He has vowed to undo regulations that are suffocating the digital asset sector.

Velázquez’s bill faces an uphill battle with Congress focused on broader tax arguments.

Still, the effort underscores mounting tensions over balancing innovation versus fairness and economic justice — not just in Puerto Rico but nationally.

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