The administration of U.S. President Joe Biden is campaigning for a tax on cryptocurrency miners equal to 30% of the cost of the power they use, citing what it calls “negative spillovers” from the industry. The move follows a raft of legal threats against crypto exchanges by regulators in what industry insiders have said will drive crypto and blockchain technology out of the U.S.
See related article: Arkansas joins Montana, Texas with bills on guidelines, protection for Bitcoin miners
Fast facts
- In a Tuesday blog post titled “The DAME Tax: Making Cryptominers Pay for Costs They Impose on Others,” the White House’s Council of Economic Advisers said that while crypto assets are virtual, “the energy consumption tied to their computationally intensive production is very real and imposes very real costs.”
- “Crypto miners’ high energy consumption has negative spillovers on the environment, quality of life, and electricity grids where these firms locate across the country,” the blog said, adding that the environmental impacts of mining operations exist even when miners use existing clean power.
- “Crypto mining does not generate the local and national economic benefits typically associated with businesses using similar amounts of electricity. Instead, the energy is used to generate digital assets whose broader social benefits have yet to materialize, as elaborated in the Economic Report of the President,” according to the blog.
- In March, the Biden administration proposed the “Digital Asset Mining Energy excise tax” as part of this year’s budget published by the U.S. Treasury Department. The proposal would be effective for taxable years beginning after December 31, 2023, according to the document. The excise tax would be phased in over three years at a rate of 10% in the first year, 20% in the second and 30% thereafter.
- The Council of Economic Advisers estimates that the excise tax could raise US$3.5 billion over 10 years.
- While the government seems to have crypto miners in its sights, the Securities and Exchange Commission (SEC) has cracked down on crypto trading platforms. In February, the regulator fined U.S. crypto exchange Kraken and shut down its staking program, a move the SEC said was “a win for investors.” In March, it issued a so-called Wells notice to the Coinbase exchange and warned it was considering legal action against the firm over its cryptocurrency staking services and other products.
- Last month, the SEC charged Seattle-based crypto exchange Bittrex for operating an unregistered exchange.
- Some U.S. states, however, are rolling out a welcome mat for crypto miners, with Arkansas last month joining Montana and Texas to propose legislation to regulate Bitcoin mining and offer mining firms legal protection.
See related article: Coinbase says SEC’s legal threats punish transparency, undermine public listing process