U.S government pushes for 30% tax on digital mining energy

The Biden administration has revived its push for a 30% tax on cryptocurrency mining in an effort to reduce the industry’s impact on climate change. The proposed tax, known as the Digital Asset Mining Energy (DAME) tax, was first introduced in President Biden’s FY2024 budget on March 9th and seeks to impose a phased-in 30% excise tax on the electricity used by crypto miners. The Department of Treasury believes that an excise tax on electricity usage by digital asset miners could reduce mining activity and its associated environmental impacts.

The White House Council of Economic Advisers (CEA) attempted to justify the need for the new tax in a May 2nd statement, arguing that crypto mining firms do not pay for the full cost they impose on society, including local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions. The CEA believes that the DAME tax would encourage firms to start taking better account of the harms they impose on society.

The blog post also cites reports suggesting that crypto mining has negative spill over effects on the environment, quality of life, and electricity grids and that pollution from electricity generation disproportionately affects low-income neighbourhoods and communities of colour while pushing up the cost of electricity for consumers. Even if crypto mining were to use existing clean power sources like hydropower, it could still have a negative impact on the environment by pushing other electricity users to dirtier sources of electricity.

The proposal has faced criticism from some in the community who argue that the tax would push Bitcoin mining to other countries like Russia and further fuel the environmental impact of the industry. Others have called the CEA’s statement misinformation and propaganda.

Overall, the proposed DAME tax aims to address the environmental impact of the cryptocurrency mining industry by incentivizing companies to take better account of the harms they impose on society. However, the proposal has been met with mixed reactions, and its effectiveness remains to be seen.