Is Biden’s controversial Bitcoin mining tax dead or set to rise from the ashes?

June 3, 2023 admin Cryptocurrency News 0

Bitcoin (BTC) miners in the United States can breathe a sigh of relief after a proposed tax on crypto mining did not make it into a bill to raise the U.S. debt ceiling that appears set to pass.

The Digital Assets Mining Energy (DAME) excise tax proposal sought to charge crypto miners a tax equal to 10% of the cost of the electricity they used for mining in 2024, before scaling up to 30% in 2026.

The tax was highly controversial, with critics arguing that it had the potential to increase global emissions as a result of miners being forced to go overseas where countries may produce more emissions during energy production.

Additionally, Bitcoin miners seek out cheap energy, and as one of the cheapest sources of energy is excess renewable energy, Bitcoin miners can actually incentivize its production by providing utilities with a buyer for energy that would otherwise be wasted.

The news broke after Bitcoin miner Riot Platforms vice president of research Pierre Rochard noted on May 28 that the proposed bill did not include any mention of the DAME tax, which Representative Warren Davidson replied was “one of the victories” of the bill.

Dead and buried or set to return?

While much of the online discussion around the news suggested the proposal was “dead,” others, such as Coin Metrics co-founder Nic Carter, highlighted that it was only temporarily defeated, alluding to the possibility of it being included in future bills.

Carter suggested later in a May 29 Twitter thread that the administration would likely attempt to sneak it into some omnibus bill and would already have done so if it had the political currency to do so.

But bills are required to pass both through Congress and the House, and considering the Republican party is generally opposed to increases in taxes and currently controls the House, it seems unlikely such an omnibus bill would be able to make it to the president’s desk.

While speaking to Chamber of Digital Commerce founder and CEO Perianne Boring during a May 20 fireside chat at the Bitcoin 2023 conference in Miami, Senator Cynthia Lummis assured viewers that the DAME tax “isn’t going to happen.”

Lummis added that ensuring Bitcoin mining firms remain in the U.S. was important for both national security and energy security, highlighting how Bitcoin mining can both reduce gas flaring emissions and help stabilize the energy grid.

Cointelegraph contacted the White House asking whether it planned to continue pursuing the DAME tax but did not receive a response.

Is the damage already done?

In response to questions from Cointelegraph, Bitcoin miner Marathon Digital Holdings CEO Fred Thiel suggested that, regardless of whether President Joe Biden’s administration decides to keep pursuing the DAME tax, it will continue its anti-crypto agenda, saying:

“I think it is clear that this administration will continue to broadly oppose the crypto sector, and even if this specific tax is no longer on the table, it is likely not the last of misguided, targeted efforts to bring this industry down.”

Many from within the crypto industry and even some U.S. lawmakers agree with this take, arguing that, among other measures, the U.S. government is making a coordinated effort to discourage banks from working with crypto firms — aka Choke Point 2.0 — under the guise of ensuring the financial system remains stable and safe.

When businesses make long-term decisions, they generally seek to reduce risk. So, given the choice of operating in a region with clear, crypto-friendly policies compared to one where regulations are unclear, and there is a greater potential for policies that hurt the competitiveness of U.S.-based activity, firms will generally choose the former.

Thiel highlighted how the actions of the U.S. government and regulators weigh in on business decisions while speaking to Cointelegraph, saying, “Regardless of the DAME tax’s likelihood of passing, Marathon has already begun diversifying the locations of our operations.”

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Thiel added that “with regulation around mining being so nebulous,” his firm has made the strategic decision not to concentrate its footprint in the U.S. but rather diversify its operations.

He pointed to a May 9 announcement from his firm, which said it would be building two new mining facilities in Abu Dhabi. 

Abu Dhabi is a region that has made a concerted effort to attract crypto-related investment via its clear regulatory regime, which has been hailed as pro-market.