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(Kitco News) – The Biden administration continues to take a more heavy-handed approach toward the cryptocurrency industry as the President’s Council of Economic Advisers (CEA) is now pushing for a 30% Digital Asset Mining Energy (DAME) tax.
According to a report from Yahoo News, the CAE is looking to institute the new tax as part of the White House’s effort to minimize the crypto mining 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 CEA argues in a post set to be released on the White House blog.
The CEA went on to lay out its case for instituting the DAME excise tax, which is referred to as an “example of the Administration’s efforts to fight climate change and reduce energy prices.”
“Currently, cryptomining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate,” the CEA said. “The DAME tax encourages firms to start taking better account of the harms they impose on society.”
Last September, the White House released a report indicating that cryptocurrency mining consumes more power than the entire country of Australia and accounts for an estimated 0.9% to 1.7% of all the electricity use in the United States.
Many in the blockchain ecosystem see this as yet another avenue of attack being used by the government to crack down on an industry that they don’t like or see as a threat. “This puts a clear line in the sand that they do not like the industry,” Tom Mapes, director of energy policy at the Chamber of Digital Commerce said. “They are looking for ways to hamstring it. This is just a way to go after the industry which they do not support.”
A recent study conducted by ESG analyst and investor Daniel Batten showed that the majority of Bitcoin mining comes from renewable energy sources, including hydroelectric (23.12%), wind power (13.98%), nuclear (7.94%), solar (4.98%) and 2.4% from other energy sources. This means that roughly 52.4% of all Bitcoin mining relies on renewable energy for its power needs, a trend that is expected to continue to grow.
Batten further projects that the industry will see a 6.2% annual growth rate in sustainability in terms of power used for Bitcoin mining, which will further reduce the use of fossil fuel-based energy.
But the energy use by the mining industry is also increasing as the crypto industry expands, and the CEA is looking to get out ahead of any future problems. In Texas, the operation of ten large-scale Bitcoin mines has resulted in higher prices for all customers amid an effort by the state’s grid operators to make sure supply and demand are in balance and avoid blackouts.
“Where we see the strains emerging are in these places that are drawing off the grid, where this starts getting noticed at the level that communities are pushing back and are experiencing consequences of it,” an economist on the CEA said. “Localities are dealing with it, and they’re struggling to come up with solutions on their own.”
The White House is looking to address the issue from the federal level as state or local regulations could result in the industry just moving to more welcoming jurisdictions. The Biden Administration wants to create national regulation “that reflects the social cost of crypto mining.”
The current plan is to have the 30% tax phased in over three years, starting with 10% and increasing by 10% each year for two additional years.
It is estimated that the proposed tax will generate $3.5 billion over a ten-year period, but the primary goal of the tax is “to start having crypto miners pay their fair share of the costs imposed on local communities and the environment,” the CEA said.
In response to cryptocurrency proponents who highlight that there are other energy-intensive industries like chemical manufacturing that are not being targeted with a tax on their electricity use, the White House has argued that crypto mining doesn’t necessarily generate the same benefits as those industries, such as job creation and the supply of essential products.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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