Crypto miners in the United States can now breathe a sigh of relief as plans by the Biden administration to impose a 30% tax on their electricity consumption have been scrapped in the latest deal to raise the country’s debt ceiling. The good news was confirmed by House Representative Warren Davidson.
Congressman Davidson said that one of the victories is blocking proposed taxes. The White House wanted to impose an additional 30% tax on crypto miners, citing concerns regarding the industry’s impact on climate change. The President’s Council of Economic Advisers (CEA) pointed out that crypto mining’s high energy consumption is negatively impacting the environment.
The tax proposal, known as the Digital Asset Mining Energy (DAME) excise tax, was part of a larger plan to raise revenue and address the environmental impact of crypto mining. It would have levied a 10% tax on the electricity used by Bitcoin and other crypto miners starting in 2024, rising to 30% by 2026.
Why Single-Out Crypto Mining?
Crypto projects can be divided into two categories, Proof-of-Work (PoW) and Proof-of-Stake (PoW). PoW requires a lot of computing power to validate and secure the network. Bitcoin and Litecoin are two of the most prominent PoW chains.
PoW requires network participants to solve complex mathematical puzzles by using powerful mining rigs. The first miner to solve the puzzle gets to add a new block to the chain and receive a reward, which is usually the project’s token. This process makes the network hard to tamper with since any hacker needs to beat the combined power of all the miners. Unfortunately, this security comes with high power consumption. But a Cambridge report has proven that most of Bitcoin’s power comes from green sources like Hydro.
A Backward Proposal was Pushed Back
The crypto industry welcomed the good news, but the debt ceiling deal still faces some hurdles before it becomes law. It must pass both chambers of Congress and be signed by the President. It might be too early to celebrate, but it is good to know that the digital assets space has support from members of Congress. Even presidential candidates are promising favorable treatment of cryptocurrencies if they get elected.
The proposed tax on crypto-mining electricity consumption would have negatively affected the country’s position as an incubator for innovation. It could have driven a lot of miners to other countries with cheaper taxes and friendlier regulators. The U.S.’s hostile treatment of digital assets has already pushed capital and innovators into the hands of more proactive jurisdictions like Dubai and Hong Kong. It is a good thing that some representatives of the people are protecting the country from losing its chance to become a global crypto hub.
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