Biden’s Proposed Crypto Mining Tax: A Cause for Concern or a Step towards Sustainability?

Source: Sen. Cynthia Lummis’ website

Introduction

The crypto world has recently been abuzz with discussions regarding President Biden’s proposed tax on cryptocurrency mining. US Sen. Cynthia Lummis, a known crypto enthusiast, has expressed her skepticism over the implementation of this proposed 30% tax, stating it “isn’t going to happen”​¹​​²​. This article aims to delve deeper into the implications of this proposed tax, the reactions from the crypto community, and potential future legislation related to the industry.

Understanding Biden’s Crypto Mining Tax Proposal

The Biden Administration proposed what is termed as the Digital Asset Mining Energy (DAME) excise tax in its budget for fiscal year 2024 in March. As per the proposal, mining firms would have to deal with a tax equivalent to 30% of the cost of the electricity they consume. The tax, planned to be implemented next year, would be gradually phased in over three years, with an incremental rate of 10% per year to ultimately reach the 30% target by the end of 2026​³​.

While this proposal has been presented as a measure towards environmental sustainability, it has received mixed responses from the crypto community. Critics argue that this tax could potentially drive mining firms out of the country and might not raise the intended funds​⁴​. Marathon Digital’s CEO, Fred Thiel, voiced his concerns at the Bitcoin 2023 conference in Miami, stating that the tax wouldn’t result in more available renewable power, but rather create less due to infrastructural limitations and long waiting lists for interconnecting new renewable energy projects​⁵​.

Future Legislation and the Crypto Community’s Response

Despite the controversy surrounding the proposed tax, discussions about future legislation related to crypto regulation continue. Sen. Lummis, along with Sen. Kirsten Gillibrand, has been working on a bill called the Responsible Innovation Act. This legislation aims to take a comprehensive approach to regulating crypto and is planned to be reintroduced in the coming month with some changes, including added consumer protections​⁶​.

Discussions within the House Financial Services Committee, however, highlight divisions among lawmakers regarding the regulation of stablecoins. The committee members seem to have different views on how best to regulate this important facet of the crypto market, with two stablecoin bills having emerged ahead of a recent hearing​⁷​.