The Biden administration has proposed a 30% tax on the cost of electricity used by Bitcoin mining operations in order to respond to theeconomic and environmental costs“. If passed, the Digital Asset Mining Energy Excise (DAME) tax would be phased in, with the White House Council of Economic Advisers (CEA) saying it would incentivize companies to better take into account the impact of their activities on society. The tax is expected to generate $3.5 billion in revenue over the next decade.
Strong industry opposition to the proposal
The companies of mining Bitcoin expressed concerns about the proposed tax, seeing it as an attempt to marginalize cryptocurrency. riota major public mining company Bitcoincriticized the proposal, arguing that the United States should be at the forefront of Bitcoin network development.
The CEO of Digital Marathon, Fred Thiel, also expressed his disapproval, suggesting that the Biden administration’s plan is more about eliminating crypto than taking meaningful action on climate change. Thiel argues that the tax could push mining operations overseas, where they would likely use energy sources generated by fossil fuels. As an example, he cited that before China’s crypto mining ban, two-thirds of electricity generation for Bitcoin mining came from coal, according to the International Energy Agency.
The environmental impact debate
The White House has acknowledged concerns about the potential relocation of mining operations to countries with dirtier energy production, citing examples where other countries have restricted or banned crypto mining. However, Thiel referred to the fourth quarter 2022 report of the Bitcoin Mining Council, which claims that Bitcoin mining accounts for just 0.17% of global energy production. By comparison, data from the US Energy Information Administration indicates that residential lighting and televisions consume slightly more kilowatt-hours of electricity than mining operations. crypto currencies in the USA.
The potential economic consequences for the industry
Thiel further argues that the proposed tax could wipe out many cryptocurrency mining businesses. He explained that adding a 30% tax on mining operations would seriously affect their profitability, potentially rendering them unprofitable and effectively closing them.
The cryptocurrency mining tax was originally introduced as a budget proposal on March 9. According to a Treasury Department document, the implementation period would last three years, with the tax starting at 10% and increasing by 10 points each following year.
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