US Government May Impose Disciplinary 30 Percent Taxes on Crypto Miners: Details
The US, in recent years, has emerged as a hotspot for crypto miners to establish their operations, especially after China imposed a blanket ban on all crypto-related activities in 2021. Given the environmental concerns and the power intensive nature of crypto mining, the US is mulling on imposing a punitive tax on companies and individuals indulging in crypto mining in the country. President Joe Biden’s government is considering a financial renumeration to be added to its federal treasury now that crypto mining is generating job opportunities in the US and is expected to boom in the times to come.
Soon, the US could ask crypto miners to pay a tax equal to 30 percent of the total energy cost that they consumed in mining cryptocurrencies. The idea has been laid out by US’ Council of Economic Advisors (CEA).
“One new proposal in this year’s Budget, the Digital Asset Mining Energy (DAME) excise tax, is an example of the President’s commitment to addressing both long-standing national challenges as well as emerging risks – in this case, the economic and environmental costs of current practices for mining crypto assets (crypto mining, for short). After a phase-in period, firms would face a tax equal to 30 percent of the cost of the electricity they use in crypto mining,” an official blog from the White House said on May 2.
In recent years, the process of mining Bitcoin has become more difficult with more advanced computers operated by mining companies and independent miners having joined the system.
Miners have to solve complex algorithms on advanced computers to mine a Bitcoin. Companies like Samsung and Jack Dorsey’s Block are working on special Bitcoin mining chips to make the otherwise power intensive process, energy efficient.
This complex process is responsible for being detrimental to the environment while also adding stress to the power grids of the regions where crypto mining has picked pace.
In November 2021, Electric Reliability Council of Texas (ERCOT) had estimated a fivefold increment in energy loads to support crypto mining and data centres.
Previously, several New York City-based businesspersons had also reached out to governor Kathy Hochul requesting her to deny permits regarding the conversion of the city’s old fossil fuel plants into crypto mining centres.
The US authorities have said that even if clean energy is used to facilitate crypto mining, it slashes the availability of clean energy for others, increasing their reliance on electricity produced by fossil fuels while also making that energy more expensive.
“Currently, crypto mining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate. The DAME tax encourages firms to start taking better account of the harms they impose on society,” the blog noted.
The US estimates that it could churn $3.5 billion (roughly Rs. 28,639 crore) in the next decade via DAME tax.