Are there any restrictions on using cryptocurrency for the capital gains in Qualified Opportunity Zones?
You can accept crypto, but it usually produces mixed investment treatment under the rules surrounding contributions of property to Qualified Opportunity Funds. To the extent of any built-in gain for the crypto itself, the taxpayer would not get Opportunity Zone(OZ) treatment for that amount; only the basis of the crypto would count. The sale of crypto held as a capital asset for fiat, however, should produce capital gain eligible for OZ deferral.
There is nothing in the Opportunity Zone rules that restricts your Qualified Opportunity Fund (QOF) from accepting cryptocurrency from an investor who acquires a QOF interest. Note that the payment would be treated as a contribution of property, and if such contribution is tax-free, the QOF would take a basis in the cryptocurrency that is equal to the investor's basis in the cryptocurrency. This means that the QOF could recognize gain or loss when it disposes of the cryptocurrency. If the QOF is a corporation, the QOF will take this gain/loss into its own income; if the QOF is treated as a partnership for tax purposes, this gain/loss should be allocated back to the investor who contributed the cryptocurrency.
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