The Biden administration has proposed a 30% tax on the electricity used for cryptocurrency mining. This move is aimed at reducing the negative environmental and economic impact of the industry. The energy requirements for cryptocurrency mining are substantial and contribute to increased greenhouse gas emissions, elevated energy prices, detrimental effects on the environment, quality of life, and electricity grids. The proposed excise tax, Digital Asset Mining Energy (DAME), would ensure that mining firms pay the total cost they impose on others.
However, some experts have raised concerns that such a tax could drive the industry away to other countries with affordable power and no taxes. Hence, discouraging innovation and development in the sector. Joel Hugentobler, an analyst at Javelin Strategy & Research, stated that the proposed tax could be an inappropriate tool that could hinder the acceptance of alternative energy sources and creative solutions.
Many cryptocurrency miners already use renewable power and innovative approaches to reduce their carbon footprint. For instance, some miners have started harnessing natural gas flaring sites for power, reducing methane emissions. Moreover, mining companies often enter into agreements with utility providers to secure a fixed price per kilowatt hour, which creates a mutually beneficial situation for both parties. Therefore, a blanket tax on energy use could stifle innovation and undermine the efforts of miners already adopting cleaner and more sustainable energy sources.
The United States regulatory landscape for the cryptocurrency industry is in chaos, with different states imposing their own regulations and federal agencies competing for oversight. The Commodity Futures Trading Commission (CFTC), together with The Securities and Exchange Commission (SEC), are engaged in a dispute over which agency has the authority over digital assets and cryptocurrencies.
SEC Chairman Gary Gensler views digital assets as securities and wants cryptocurrency firms to register with the agency and abide by the same regulations as traditional securities firms. In contrast, the CFTC considers bitcoin and ether, the two major cryptocurrencies, as commodities, and Chairman Rostin Behnam is urging Congress to give the agency jurisdiction over cryptocurrency spot markets.
The absence of a federal-level legal framework for mining operations has resulted in individual states filling the gap by introducing their regulations. Some states have targeted the energy usage of mining operations, while others have welcomed mining operations with open arms. This approach has led to a patchwork of rules that have not effectively brought coherence and regulation to the nascent cryptocurrency mining industry.
