Which Are The Most Crypto Friendly States?

Which states are the most crypto friendly in 2024? From Wyoming to Florida to Texas - there are plenty of options. Learn more in our guide.

Bitcoin and other cryptocurrencies are rapidly becoming key drivers in financial and technological innovation, and several U.S. states are positioning themselves as attractive locations for both crypto investors and businesses.

Each state takes a unique approach to cryptocurrency regulation, taxation, and business incentives. We’re covering the most crypto friendly states in terms of regulations, tax, business initiatives, and more, as well as the least crypto friendly states in this guide. 

Top 7 crypto friendly states

1. Wyoming

Wyoming leads the way for crypto friendly states for both investors and businesses. The state has passed more than a dozen pro-crypto laws, establishing a regulatory framework that is one of the most welcoming in the nation. Wyoming was the first to recognize decentralized autonomous organizations as legal entities, providing much-needed clarity for tokenized securities and fostering the growth of DeFi.

Wyoming also does not impose personal or corporate income taxes, making it extremely attractive for both individual investors and companies. In addition, Wyoming has pioneered the creation of crypto banks, like the Kraken Bank, and introduced the Financial Technology Sandbox program, which allows businesses to test new crypto products without heavy regulatory restrictions.

What's the significance of Wyoming for crypto?

Wyoming’s business-friendly environment, zero income tax, and pioneering regulations make it a clear leader for both individual crypto investors and companies. It has also implemented a sales tax exemption for crypto mining equipment, provided the buyer has mined over $5 million worth of coins, making it a major hub for crypto miners. Wyoming continues to invest in its crypto ecosystem, and its stable token initiative aims to lower consumer payment costs by using blockchain technology.

The state's efforts to launch a dollar-backed stable token by 2025 reflect its commitment to integrating blockchain into its economy. Although challenges remain—such as educating the public and ensuring adoption — as the state reduces its dependence on the fossil fuel industry, it is betting on crypto to diversify its economy by offering some of the lowest electricity costs in the nation and pro-crypto regulations.

2. Florida

Florida is another state that offers significant benefits for the cryptocurrency industry. With no state income tax and a growing number of crypto friendly policies, Florida is drawing in both individual investors and crypto startups. The state has exempted crypto businesses from money transmission licenses and launched a pilot program allowing businesses to pay for state fees using cryptocurrency.

Miami’s mayor, Francis Suarez, has championed cryptocurrency, even receiving part of his salary in Bitcoin, and actively encourages crypto businesses to set up operations in the city. This has transformed Miami into one of the leading crypto cities in the U.S., hosting major events and attracting high-profile companies.

3. Texas

Texas has quickly become one of the most crypto friendly states, thanks to its favorable regulations and low energy costs, which are a significant factor for crypto miners.

Back in 2021, the Texas Department of Bank authorized state-chartered banks to offer crypto custody services, giving the industry a solid foundation for growth. Additionally, the state offers a range of incentives for crypto miners, including 10-year tax abatements, sales tax credits, and workforce training initiatives.

Texas is already one of the largest centers for crypto mining in the US thanks to low energy costs. While the state's independent power grid has faced challenges, the incentives for miners to set up shop in Texas are hard to ignore, especially given the state has no personal state income tax. 

4. New Hampshire

New Hampshire ranks highly due to its favorable tax policies for crypto investors and businesses. The state has no taxes on capital gains, which makes it an attractive location for investors looking to cash out their crypto holdings without facing hefty state tax bills. Additionally, New Hampshire has exempted crypto businesses from money transmission regulations, making it easier for companies to operate.

While New Hampshire does have a 5% tax on interest and dividends, it remains one of the best states for those looking to invest in or start crypto-related businesses. Its relatively hands-off regulatory approach has encouraged innovation, while still providing legal clarity for companies operating in the space.

5. Colorado

In 2022, Colorado Governor Jared Polis announced that residents could pay their state taxes using cryptocurrency, making it one of the few states to accept crypto for government payments. While Colorado does have a state income tax of 4.55%, its supportive attitude towards blockchain innovation and growing crypto ecosystem have earned it a place among the top crypto friendly states.

The state has also launched a blockchain sandbox program, allowing companies to test their products under regulatory oversight. Colorado’s tax environment, though not as favorable as states like Florida or Wyoming, is offset by its regulatory innovations and pro-crypto policies.

Read next: US Crypto Tax Guide

6. Arizona

Arizona has made significant moves in creating a crypto friendly regulatory environment. Back in 2022, it became the first state to declare that receiving an airdrop is exempt from state-level taxation. While federal taxes still apply, this clarification makes Arizona a more attractive location for crypto traders and investors.

Arizona's state income tax is relatively low, with a flat rate of 2.5% and a corporate tax rate of 4.9%, making it a competitive choice for both individual investors and crypto businesses. The state has also passed legislation that recognizes blockchain technology and smart contracts, providing a solid legal foundation for blockchain companies.

7. Kentucky

Kentucky has become increasingly attractive to the crypto mining industry thanks to a series of tax breaks and incentives. Back in 2021, Kentucky passed legislation that extends clean energy tax breaks to crypto miners who invest over $1 million in equipment. The state offers a flat personal income tax rate of 5% and corporate tax rates ranging from 4% to 6%, making it a reasonable option for businesses and individuals alike.

Read next: Crypto Mining Taxes

Crypto friendly states for tax

States that do not impose personal or corporate income tax are particularly attractive to crypto investors looking to minimize their tax liability. Eight states do not levy state income taxes on individuals:

• Alaska

• Florida

• Nevada

• South Dakota

• Tennessee

• Texas

• Washington

• Wyoming

Read next: US Bitcoin & Crypto Tax Rates

What are the worst states for crypto?

Not all states have embraced cryptocurrency with open arms. Some have implemented a multitude of regulations and tax policies that make them less attractive for businesses and investors.

1. New York

New York has long been a difficult state for crypto companies, primarily due to its BitLicense requirement. This program, introduced in 2015, imposes strict regulatory standards on crypto businesses operating in the state. The process of obtaining a BitLicense is costly and has been criticized for its overreach, leading exchanges like Kraken to stop operating in New York.

Additionally, New York has some of the highest state taxes in the U.S., with income tax rates ranging from 4% to 10.9%. For residents of New York City, an additional 3% to 4% tax is applied, making it one of the least favorable states for crypto investors.

2. California

California's tax structure makes it one of the least attractive states for crypto investors. The state has the highest income taxes in the country, ranging from 1% to 13.3%. Although the state has taken some steps towards fostering crypto innovation, such as vetoing a BitLicense-like regulatory framework, the high tax burden makes California less appealing to both investors and businesses.

3. Hawaii

Hawaii has historically imposed strict regulations on crypto businesses, requiring them to hold fiat reserves equal to the value of digital assets. This led exchanges like Coinbase, Binance, and Kraken to stop operating in the state previously, although Coinbase has since returned in 2024. 

Although Hawaii has since launched a pilot program that allows select exchanges to operate without a money transmitter license, the state still has some of the highest income tax rates, ranging from 1.4% to 11%, with capital gains taxed at 7.25%.

Calculate your crypto taxes with Koinly

Whatever state you live in, Koinly can easily help you calculate your crypto taxes and generate the forms you need - like Schedule D, Form 8949, and TurboTax Reports - so you can easily report your crypto to the IRS. Best of all, Koinly's totally free to try out, you'll only ever pay when you want to generate a tax report.