President Biden Proposes 30% Tax on Cryptocurrency Mining Electricity
President Joe Biden’s annual budget proposal has called for a 30% tax on all electricity used for mining cryptocurrencies like Bitcoin. The tax would be phased in over three years, starting with 10% in the first year, 20% in the second, and finally 30% thereafter. The proposal aims to reduce mining activity, which has been associated with negative environmental impacts and risks to local utilities.
JUST IN: 🇺🇸 President Biden calls for a 30% tax on all electricity used to mine #Bitcoin and #cryptocurrency.
— Watcher.Guru (@WatcherGuru) March 9, 2023
Proposed New Excise Tax
The current law does not provide tax rules specifically for digital assets. However, there are certain exceptions related to broker reporting and cash transactions. The proposed excise tax would apply to any firm using computing resources, whether owned by it or leased from others, to mine cryptocurrencies.
According to the proposal, “An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.” The large amount of energy required for computational effort was mentioned as a significant drawback of cryptocurrency mining. The proposed tax would require firms engaged in cryptocurrency mining to report the amount and type of electricity used as well as the value of that electricity, if purchased externally. Meanwhile, firms that lease computational capacity would need to report the value of the electricity used by the lessor firm attributable to the leased capacity.
Promoting Environmental Sustainability
The move by the Biden administration is in line with its broader environmental and climate policies. Cryptocurrency mining has been associated with significant energy consumption and carbon emissions. The administration aims to reduce the environmental impacts of digital asset mining while also generating revenue for the government.
The proposal has drawn mixed reactions from the digital asset industry. Some have criticized the tax as punitive and harmful to innovation. Others have welcomed the proposal, saying it would promote more sustainable practices and reduce negative environmental impacts. The proposal will now be subject to debate and review in Congress, and it remains to be seen whether it will be included in the final budget.
