Biden proposes 30% tax on cryptominers' power bills
Digi-dollars are toxic in many ways and the administration wants the sector to clean up its act
The Biden Administration on Tuesday detailed a proposed tax designed to counter the environmental and economic effects of cryptocurrency mining.
The Digital Asset Mining Energy excise tax – DAME for short – would require American firms to pay a tax equal to 30 percent of the electricity bill consumed by computers used to make digi-dollars after a phase-in period that begins at the start of 2024.
In 2024, businesses engaged in digital asset mining would pay 10 percent of their bill in tax, before the rate rises to 20 percent in 2025 and hits 30 percent in 2026.
The White House predicts the efforts will raise $3.5 billion in revenue over a decade.
"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 DAME tax encourages firms to start taking better account of the harms they impose on society," reads a White House statement.
According to the administration, the amount of electricity used for cryptomining in the US in 2022 was close to that required for residential lighting of the entire nation.
A New York Times investigation found that the most power intensive Bitcoin mining operation in America, Riot Platforms' mine in Rockdale, Texas, uses around the same amount of electricity as the nearest 300,000 homes combined.
Around a mile away from Riot Platforms' Rockdale mine, a Bitdeer mine was reportedly paid $175,000 an hour to turn off its cryptomining computers during a February 2021 winter storm that downed Texas’s power grid for days, killed 246 individuals and led to the unwelcome shut down of Samsung's semiconductor facility in the midst of a global silicon shortage.
The administration cited a study that found pollution from energy generation is more prevalent in low-income neighborhoods. It noted that competition for power contributes to increased electricity prices and strain on infrastructure, and energy consumers feel the squeeze.
The White House specifically said the DAME tax was "not a panacea" and "only one example of the Administration's efforts to fight climate change, reduce energy prices, and increase access to electrified options for all Americans."
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With crypto enthusiasm waning and sustainability on the rise, it was only a matter of time before such measures began to appear.
Anti-vaxxer and potential Democratic presidential candidate Robert F Kennedy Jr opposed the plan on Twitter, arguing that the proposal was a "bad idea," and compared crypto's electricity usage to that of video games – which nobody proposes to ban.
The climate impact of gaming has drawn more notice as the pastime grows, but overall has been difficult to quantify. A pre-COVID 2019 peer-reviewed study estimated that American gamers collectively used up to 34 terawatt-hours of electricity annually.
Information posted by the World Economic Forum listed Bitcoin mining power usage at 62TWh per year as of 2020.
One segment of the tech industry that remains seriously carbon intensive is semiconductor production. However, given the current geopolitical environment and state of Sino-US relations, restricting that activity would be considered a national security risk.
Notably, China was once a leader in cryptomining – particularly Bitcoin. That all changed when Beijing banned cryptocurrency in 2021. The country has also heavily restricted gaming for a number of years. ®