The aggressive stance taken by the United States on cryptocurrency regulations, despite approving Bitcoin ETFs, is undeniable. This is especially true for the Bitcoin mining industry, which has a long history dating back to the early days of Bitcoin. However, the government seems determined to destroy the industry, even though it operates on a cleaner energy grid compared to most countries.
Instead of adopting a business-friendly approach or recognizing the value brought by a domestic Bitcoin mining industry, the Biden administration has reintroduced a controversial proposal to impose a 30% excise tax on the cost of electricity used for Bitcoin mining. This proposal, known as the Digital Asset Mining Energy tax (DAME), could potentially drive American Bitcoin miners, such as RIOT Platforms and Marathon Digital Holdings, to leave the country.
Senator Cynthia Lummis, a Republican from Wyoming, expressed her concerns, stating, “A proposed 30% punitive tax on digital asset mining would destroy any foothold the industry has in America.”
The DAME tax was first proposed by the Biden administration in May 2023 but was quickly rejected by lawmakers and industry leaders. However, it has now been reintroduced as part of the fiscal 2025 budget proposal, set to take effect on October 1. The administration claims that it would raise $3.5 billion over a decade, with the tax gradually increasing from 10% in the first year to 30% by the third year.
The White House argues that the tax aims to make miners pay their fair share of costs imposed on local communities and the environment. However, it fails to mention that the US has become the world’s largest Bitcoin mining market, with the sector’s global share growing from 3.4% to 37.8% in 2022.
Senator Lummis criticized the administration’s plan, stating, “A 30% tax hike on any specific industry is a blatant attempt by the administration to pick winners and losers.”
The administration’s approach could ultimately backfire, especially considering President Biden’s low approval ratings. The DAME tax is unlikely to generate significant revenue once it destroys the entire industry. Less efficient miners may go out of business or move to countries with less environmentally friendly energy standards. Even clean energy miners could face closure, preventing the industry from adopting sustainable practices.
As a result, there will be job losses and a decrease in tax revenue, which contradicts Biden’s promise of increased revenue. The administration even acknowledges that the US Bitcoin mining industry could relocate to areas with dirtier energy production.
Rather than demonstrating bold leadership aligned with the American spirit, the administration points to other countries, including China, that have restricted crypto asset mining. This raises concerns that Biden may propose a total moratorium on mining if his tax plan fails.
It would be wise for the administration to seek industry feedback before moving forward with the DAME tax. Crypto advocates are an informed and active voting bloc, particularly in coastal states with strong Democratic constituencies. Shelving the tax could help Democrats secure votes that might otherwise go to Robert F. Kennedy Jr., who has shown a more favorable stance on Bitcoin than Biden or former President Trump.
Considering the proposal would be in the best interest of America and the world as a whole.
Kadan Stadelmann is a guest author for Cointelegraph and the chief technology officer for the Komodo Platform. He graduated from the University of Vienna in 2011 with a degree in information technology and later attended the Berlin Institute of Technology for technical informatics and scientific computing. He joined the Komodo team in 2016.
Please note that this article is for general information purposes only and should not be considered legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.