The Biden administration recently reintroduced a proposal to impose a 30% tax on all “cryptocurrency miners” – a move that represents an ideological witch hunt against a fast-growing industry (see my previous comments).
The measure, part of the government’s budget proposal for the coming fiscal year, which was introduced in March, stands in stark contrast to recent pro-crypto statements from former President Donald Trump, who this week called on the US to abandon bitcoin dominate the mining sector. It remains to be seen whether the tax on crypto mining will go into effect (or whether Trump will make good on his aggressive crypto policies if elected), although many have begun to argue in recent weeks that President Biden may be easing up on the industry.
Also see: Trump’s call to Bitcoin miners is a wake-up call for Crypto to remain apolitical | Opinion
It must be said that implementing a blanket 30% federal tax on digital asset mining will kill the industry and wipe out billions of dollars of investor value in the United States, and very likely in Canada too, given the way the current Canada’s federal government is closely following U.S. regulatory precedents.
Taras Kulyk is founder and CEO of SunnySide Digital.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
In the “land of the free,” this kind of heavy-handed Stalinesque central planning directive screams in the face of the democratic ideals (ironically) that should be embraced by the current White House administration. First, they came for your digital mining and you did nothing…
The fine print on Biden’s proposed tax
The blatant mining tax, which is being introduced despite billions of dollars invested in the sector, is part of his budget proposal for the 2025 fiscal year, which aims to tackle environmental problems and regulate the digital asset mining industry. The proposal suggests that the tax would be introduced over three years, starting at 10% in the first year, rising to 20% in the second year and reaching the full 30% in the third year. This tax only harms digital mining, and not data centers in general.
The government argues that the tax is necessary to combat the environmental impacts of cryptocurrency mining, including its high energy consumption and the potential to increase energy prices for communities hosting mining operations, in light of established research that this concern biggest problem. the exact opposite of the economic reality and operational impact for energy companies.
While I am not a lawyer and these arguments should be taken with a grain of salt, it is important to note that it is likely unconstitutional for a presidential administration to tax the energy consumption of a specific industry. There is simply no precedent for this.
By targeting a specific sector with an energy consumption tax, the government could be seen as violating a number of clauses, including the Commerce Clause in Article I, Section 8, Clause 3 of the U.S. Constitution, the Equal Protection Clause of the 14th Amendment. , the Due Process Clause found in the Fifth Amendment to the United States Constitution or under the Statute of Unintended Consequences.
Moreover, there are ethical implications that go beyond any possible unconstitutional overstep. This type of deception has become far too common and is something the founding fathers of the US were aware of and tried to prevent through the Constitution itself.
How to Kill an Emerging Industry 101
The Biden administration’s proposed tax would impose a significant financial burden on digital mining companies, most likely making their operations economically unviable. Because these companies already face intense competition and tight margins, this tax would only exacerbate financial struggles and lead to material losses for investors.
As a result, many mining companies would likely be forced to close or relocate to other countries with more favorable tax policies, leading to job losses and reduced economic activity in the United States.
Furthermore, the proposed tax would disproportionately impact smaller digital mining operations, which may not have the resources to absorb the additional costs or relocate to other jurisdictions. This would create an uneven playing field, favoring larger, more established mining companies, stifling competition and innovation in the sector and increasing centralization for larger operators.
If this administration’s goal is to hurt small businesses, stifle innovation, and build a reputation for reducing economic activity in the US, then they are on the right track.
Environmental problems and the ineffectiveness of the tax
The Biden administration claims the proposed tax is necessary to address the environmental impacts of bitcoin mining, as it consumes significant amounts of electricity. However, this argument ignores the fact that many mining operations already use renewable energy sources and are actively working to reduce their carbon footprint.
In addition, the proposal does not take into account the use of methods such as methane flaring, which reduces CO2 equivalent emissions by approximately 63% compared to traditional methane flaring methods, and landfill mining, which produces the same amount in one year has the same effect as planting methane. five million trees and let them grow for ten years. Bitcoin mining has been proven to strengthen networks and even reduce energy costs for local communities.
In fact, imposing a tax on energy consumption could discourage these efforts and encourage miners to use less environmentally friendly energy sources abroad. What will happen is a mass exodus of miners from the US, which has the most renewable energy, and move them abroad, where fossil fuels are mainly used.
The fact is that approximately 90% of CO2 emissions come from outside the United States. Since addressing “environmental problems” is a global problem, they would only be contributing to the problem through their own logic.
So what should the government do? Nothing. Let the free market rule. Bitcoin miners are the scarab beetles of energy. They go where the energy is cheapest, and because of the initial operating costs of fossil fuel miners and the low operating costs of renewables, it is easy to see why the majority of mining comes from renewable sources to begin with.
Global competition
The bitcoin mining industry is highly competitive, with countries such as China, Russia and Canada vying for dominance. The proposed tax would undermine the United States’ position in this global race by making the country a less attractive destination for mining activities. This could result in a significant loss of investment, talent, and technological advancements, which could ultimately weaken the United States’ role in the digital economy.
One lesson learned after China banned bitcoin mining in 2021 was the resilience and adaptability of the bitcoin mining industry. Despite the ban, bitcoin mining operations found new homes in countries with more favorable regulatory environments and access to renewable energy sources. This showed that the Bitcoin network is not geographically limited and can adapt to regulatory changes.
Furthermore, the shift towards more sustainable energy sources highlighted the potential for bitcoin mining to contribute positively to the global energy transition
Furthermore, the tax could also have broader implications for the cryptocurrency industry as a whole. By focusing on bitcoin mining, the Biden administration may inadvertently discourage innovation and investment in the industry, which could have far-reaching consequences for the country’s technological development and competitiveness.
You can’t ban mining, you can only ban yourself
In summary, the Biden administration’s proposed tax on bitcoin mining would have serious negative consequences for the industry and the broader digital economy in the United States, and therefore for its own initiatives.
Also see: Bitcoin Miners Show Muscle in Resisting Guarantee-Free EIA Survey
It would impose a significant financial burden on mining companies, discourage sustainable mining practices and undermine the country’s competitiveness in the global market. These types of measures are more in line with oppressive countries like China or what the Soviet Union was like, and it is incredibly disheartening to see this from the United States.
Just as the industry rallied to defeat the unconstitutional EIA investigation, we must pay the same attention here. You cannot ban Bitcoin mining, you can only ban yourself.
