The Biden administration has proposed a 30% tax on electricity used by cryptocurrency mining operations in its 2024 fiscal year budget. The Digital Asset Mining Energy (DAME) excise tax is aimed at crypto mining firms, which the White House claims are not paying for the full cost they impose on others, including environmental pollution and high energy prices.
Environmental and Social Impact of Crypto Mining
The White House states that crypto mining has negative environmental spillovers, with pollution disproportionately affecting low-income neighborhoods and communities of color. Additionally, volatile power consumption from mining operations can raise electricity prices for surrounding communities and cause service interruptions.
The Scale of U.S. Cryptocurrency Mining
In April, The New York Times reported that 34 large-scale Bitcoin mining operations in the US use the same electricity as three million households. Most Bitcoin mining took place in China until it was banned in 2021, making the US the new leader in this energy-intensive industry.
Comparing Crypto Mining to Other Industries
While other industries like steel manufacturing also consume large amounts of electricity, the White House argues that crypto mining does not generate the local and national economic benefits typically associated with businesses using similar amounts of power.
Criticisms and Alternatives to DAME Tax
Critics argue that the government's proposal aims to target and harm an industry it does not support. A Forbes report suggested that taxing the industry's greenhouse gas emissions might be a better alternative. It could encourage mining firms to minimize energy use and seek cleaner power sources.
Proposed Phased Implementation of DAME Tax
If enacted, the excise tax would be implemented in phases, starting with a 10% tax on miners' electricity use in the first year, 20% in the second, and 30% from the third year onwards.