The Biden administration is seeking to enact a punitive tax to address the economic and environmental costs associated with cryptomining, according to its recently released budget proposal for 2024.
The implementation of an excise tax on Digital Asset Mining Energy, or DAME, as it is known in the budget, would subject companies operating in the nation to a tax equal to 30% of the cost of the electricity they use to mine cryptocurrencies. Over a ten-year period, the DAME tax is anticipated to generate $3.5 billion in revenue.
The White House's Council of Economic Advisers (CEA) stated in a post on Tuesday that cryptomining businesses currently operating in the country do not fully cover the costs they impose on society. These include the effects of increased greenhouse gas emissions on the climate, higher energy prices, and local environmental pollution.
The tax claims to address the negative side effects that cryptominers' high energy consumption has on the environment, people's quality of life, and electricity grids where these businesses are located throughout the United States. For those who share an electricity grid with miners of digital assets, for instance, cryptomining may result in an increase in energy costs, the post outlines.
It continues by pointing to studies that show that any minor increases in tax revenue are outweighed by the higher energy costs for households and businesses involved in the industry, adding that despite using comparable amounts of energy, cryptomining does not yield the same economic benefits that businesses typically do, further noting that cryptomining consumes energy primarily to produce digital assets, which have not yet produced significant social benefits.
Additionally, the White House cites recent reporting by the New York Times that highlights the scale of the power consumption connected with 34 of the biggest cryptomining operations, which the newspaper calculated to be equivalent to the power used by the nearby 3 million homes.
So far, three Canadian provinces have either announced or implemented their own complete bans on the practice, while eight other nations—including China—have done the same. Considering this, a move to limit cryptomining techniques is by no means unprecedented.
Despite some efforts by various U.S. states and localities to either restrict cryptomining or subject the activity to higher electricity prices, there are no specific tax regulations for digital assets under U.S. law.
The White House notes that while the tax is not "a panacea", it aims to ensure that cryptominers contribute to the costs the activity places on local communities and the environment.
Officially, the tax is a component of a larger strategy by the Biden administration, which has stated that its goals are to fight climate change, reduce energy costs, and increase nationwide access to electrified solutions.
However, if we look at this coupled with Mr. Biden's deficit reduction goals with ever-increasing promises, then the methods start to look quite strange. On the one hand, the United States obstructs the free development of crypto industry and on the other hand, expects to generate billions in tax revenues. We continue to Observe.