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The Biden administration is pushing for a tax on crypto mining

Biden proposes 30% climate change tax on cryptocurrency mining.

The White House is trying to persuade Congress to pass a 30% tax on the electricity used in cryptocurrency mining in the next federal budget in order to minimize the nascent industry’s impact on climate change.

“Cryptominers’ high-energy consumption has negative spillovers on the environment, quality of life, and electricity grids where these firms locate across the country”

the president’s Council of Economic Advisers (CEA) argues in a blog post that will appear on the White House website on Tuesday.

The post will lay out the case for the Digital Asset Mining Energy (DAME) excise tax, which the CEA writes is an “example of the Administration’s efforts to fight climate change and reduce energy prices.”

cryptocurrency mining consumes more power than the entire country of Australia!

In “proof-of-work” cryptocurrency mining — the most energy-intensive approach to mining, and the one used by bitcoin, by far the largest cryptocurrency — massive supercomputers compete to be the first to solve a mathematical puzzle.

This process requires massive amounts of electricity.

According to a White House report from last September, cryptocurrency mining consumes more power than the entire country of Australia.

In the U.S., which is home to roughly one-third of crypto mining operations, it accounts for an estimated 0.9% to 1.7% of all the country’s electricity use. That energy use is growing rapidly as the crypto industry expands.

In the United States, the world’s leader in cryptocurrency mining, 34 large-scale bitcoin mines collectively use as much electricity as nearly 3 million U.S. households, the New York Times reported.

Ten of those mines are connected to the energy grid in Texas, and those mines’ demand for electricity has led the state grid operators to charge higher prices for all customers to make sure supply and demand are in balance and to avoid blackouts.

In New York, where one crypto mining company bought and reactivated a decommissioned natural-gas-fired power plant to power its operation, Gov. Kathy Hochul, a Democrat, signed a bill late last year that would put a moratorium on licensing for any more fossil-fuel-powered crypto mining facilities.

State or local regulation might just lead the industry to move elsewhere

State or local regulation might just lead the industry to move elsewhere
The Greenidge Generation bitcoin mining facility in Dresden, N.Y. The plant also produces power for the state’s electricity grid.

State or local regulation might just lead the industry to move elsewhere, the White House says, so it believes that the federal government needs to step in and provide some national regulation that reflects the social cost of crypto mining.

The tax would be phased in over three years, starting at 10% next year, then rising to 20% and finally 30%.

The proposed tax on mining cryptocurrency would generate an estimated $3.5 billion over 10 years.

But revenue isn’t the point, according to the CEA, which writes in its forthcoming post that “the primary goal of the DAME tax is to start having crypto miners pay their fair share of the costs imposed on local communities and the environment.”

Economist James Broughel has criticized the proposal, arguing in Forbes that it would make more sense to tax the greenhouse gas emissions from crypto mining, rather than electricity usage.

In other words, why penalize crypto mining companies that use clean energy?

The White House counters that any increase in electricity use makes it harder to green the grid because it means that much more clean energy is needed.

Critics of the proposed tax say the crypto mining industry is being unfairly targeted.

Of course, there are other energy-intensive industries, such as manufacturing of chemicals and steel, that are not being targeted with a tax on their electricity use.

But the White House argues that crypto mining doesn’t necessarily generate the same benefits, including creating jobs and supplying essential products, as those other sectors of the economy.

At the same time, the price volatility of crypto — the value of one bitcoin has fluctuated between $15,000 and $40,000 over the last year — may pose risks to the financial system.

“It’s not yet clear what the economic benefits of this activity are,” the White House economist said of cryptocurrency.

“At the same time that the benefits have not been fully documented, there are concerns about risk to financial stability, and certainly the environmental concerns.”

Advocates for the cryptocurrency industry say it does have benefits for its users.

  • “Millions of people are using this to transact around the world,”
  • “It’s an opportunity for the unbanked or underbanked to bank, and it’s a way to send money across borders without having to pay a middleman.”

Some argue that the White House is selectively picking winners and losers among industries.“It seems like there’s an outsized focus on us”.

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