It is widely acknowledged that the United States has adopted a tough stance towards cryptocurrency regulations, even after approving Bitcoin ETFs. This holds especially true for the Bitcoin mining sector, which can trace its roots back to Bitcoin’s inception. However, federal authorities appear determined to curtail the industry, despite it relying on a greener energy grid than many countries provide.
Instead of advocating for a business-friendly stance or recognizing the contributions of the domestic Bitcoin mining sector, the Biden administration in March proposed a contentious 30% tax on the electricity expense for Bitcoin mining. Dubbed the Digital Asset Mining Energy tax (DAME), this harsh measure may cause major Bitcoin mining companies like RIOT Platforms and Marathon Digital Holdings to leave American soil.
Senator Cynthia Lummis, a Wyoming Republican, stated in her writing on X that imposing a 30% punitive tax on digital asset mining would wipe out any presence the industry has managed to establish in the United States.
The Biden administration initially presented the DAME tax proposal in May 2023, but it faced strong opposition from lawmakers and industry figures, leading to its withdrawal the same month. However, it seemed that the administration had been saving the idea for a more opportune time. In their fiscal 2025 budget plan, proposed in May 2024, the Biden administration revived DAME as a means of generating approximately $3.5 billion over ten years. The tax would gradually increase from 10% in its first year to 20% in the second and eventually reach 30% by the third year.
The White House expressed its plan to make Bitcoin miners cover the reasonable expenses borne by local communities and the environment. However, it failed to note that the industry expanded significantly from a 3.4% global share in 2021 to a dominating 37.8% in 2022, placing the United States at the forefront of worldwide Bitcoin mining.
The administration’s aggressive approach may ultimately harm the president with only about 40% approval from the public. The proposed DAME tax could lead to the demise of the industry, leaving less efficient miners vulnerable and potentially driving them out of business or to countries with less stringent environmental regulations. Even eco-friendly mining operations might not survive, taking away the industry’s opportunity to adapt and become more sustainable in the face of growing concerns over its long-term viability.
The consequence of this action would mean lost jobs and decreased tax income, which contrasts sharply with Biden’s unfulfilled pledge that it will generate more revenue. Notably, the US Bitcoin mining sector may migrate to regions with less clean energy production as acknowledged by the administration.
The administration has mentioned that other countries have been limiting cryptocurrency mining, with China being cited as an example. This statement from the administration may indicate a possible complete ban on mining, especially if their proposed tax isn’t enacted.
The proposed DAME tax by the Biden administration could negatively impact American Bitcoin miners and investors. It is advisable for the administration to seek industry input before making a decision. Crypto supporters are an informed and politically engaged group, particularly in Democratic strongholds along the coast. Abandoning the DAME tax might help Democrats win over votes that could otherwise go to RFK Jr., who holds pro-Bitcoin views. Additionally, reconsidering this tax would benefit not only America but also the global community.
The following article provides basic information and is not meant to be construed as legal or financial guidance. The perspectives shared within this piece are those of the author and may not align with the views of CryptoMoon.
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2024-04-22 23:38