As crypto industry awaits legal framework from Congress – two House committees are working together now To move forward with legislation – the Biden administration is pushing a proposal to tax miners’ energy use.
in a Blog Posts Published Tuesday Following a recommendation from the Council of Economic Advisers, the administration said it wants Congress to impose a 30 percent tax on the cost of electricity used for cryptocurrency mining.
From the post: “The high energy consumption of crypto miners is negatively impacting the environment, quality of life and power grids these companies have spread across the country.”
And: “Currently, crypto mining companies don’t have to pay for the full costs they impose on others, such as local environmental pollution, rising energy prices, and the climate impact of increased greenhouse gas emissions.”
The proposed excise tax is called DAME, which stands for Digital Asset Mining Energy.
The US approach to hybrid cryptocurrency mining
As detailed in a recent report by Javelin Strategy & Research, Bitcoin Mining and ESG: States Get Into ActionThe federal government lacks any legal framework for mining operations, prompting states to fill in the gaps and enforce their own rules.
Bitcoin is by far the best-known example of a cryptocurrency mined using the proof-of-work protocol, where large computer operations solve complex algorithms and earn coins. The energy use generated by these large operations has been the target of increased regulation in some states.
The result is a fragmented set of rules, some aimed at controlling cryptocurrency mining (New York) and some welcoming signs for mining operations (e.g. Missouri and Mississippi).
Who are the regulators?
In any case, so far, these attempts to bring legal coherence and regulation to the fledgling industry have mostly sparked confusion.
Two federal agencies, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, are engaged in a turf war over who is in charge of regulating cryptocurrencies and digital assets.
SEC Chairman Gary Gensler has expressed his view that digital assets are securities and wants crypto companies to register with the agency and act like companies it traditionally regulates.
In contrast, the CFTC has labeled two major cryptocurrencies, bitcoin and ether, as commodities. Chairman Rostin Behnam wants Congress give agency control On the cryptocurrency spot market.
Then there is Congress itself. House Republicans — the two-committee strategy of the Financial Services and Agriculture Committees, which oversee the SEC and the CFTC — are the latest legislative efforts to bring clarity to the field.
“It is unprecedented for two committees to work together on a joint legislative product like this, and I believe it greatly increases our chances of success,” said Rep. France Hill (R-Ark.), chair of the Financial Services subcommittee. Financial technology and inclusion.
how much energy
As of Tuesday, Cambridge University Bitcoin Electricity Usage Index It shows that the estimated annualized total is 131.22 TWh, the theoretical low is 63.64 TWh, and the theoretical high is 231.98.
Consumption has risen sharply since 2017:
However, analysts at Javelin Strategy & Research Joel Hugentobler Describing the proposed tax as a blunt and misguided tool that, if enacted, would drive the industry away.
“For whatever reason, taxing miners will cause them to travel to another country where they can find electricity that is just as cheap and pay no taxes,” he said. “The federal government has always said it wants to be a leader in innovation, but everything it has proposed or spent years proposing — the regulatory framework in general — proves otherwise.”
He also took issue with the specifics of the government’s tax case, noting that cryptocurrency miners already use renewable energy and innovative methods, such as using natural gas flaring to generate electricity, to reduce methane emissions.
“Miners don’t raise electricity prices for consumers. They sign agreements with utilities to lock in a price per kilowatt-hour,” he said. “It’s a win-win for both parties. Utilities get guaranteed payments for electricity, miners get guaranteed prices. And miners are willing to shut down in emergencies in order to provide citizens with extra baseload power.
“What they’ve done with the Ercot grid in Texas is unbelievable. During a power outage, miners are able to shut down within 10 minutes and get power to those who need it. That’s something no other industry can do.”