A stalled tax on crypto mining caused currencies and mining companies to rally this week.
Key Details
- Amid debt-ceiling negotiations, President Joe Biden has agreed to withdraw a 30% tax on electricity used by crypto-mining companies.
- The Digital Assets Mining Energy excise act (DAME Act) was proposed to go into effect next year and would have enacted an excise tax progressively over the next several years.
- Mining companies—including Riot Platforms, Iris Energy, Hive Blockchain, Cleanspark, and Marathon Digital Holdings—saw as much as a 5% to 10% bump in valuations, Forbes reports.
- Bitcoin similarly rallied Monday and Tuesday before dropping 3.2% Wednesday morning. Ethereum saw a similar trend and a 2.5% drop.
Why It’s Important
Bitcoin and crypto are seen as the future of finance by evangelists, but the short-term costs of crypto have been a widespread concern for those who recognize the energy cost that comes with crypto mining.
Crypto mining involves using large supercomputers to solve cryptographic puzzles allowing owners to receive newly generated Bitcoin or other cryptocurrencies. However, the energy consumption of operating these computer rigs draws 120 and 240 billion kilowatt-hours per year, roughly equivalent to the energy usage of small industrialized countries.
“The primary goal of the DAME tax is to start having crypto miners pay their fair share of the costs imposed on local communities and the environment,” says the White House, which expected to generate $3.5 billion in tax revenue in the next decade from the tax.
While there are bipartisan supporters and opponents of crypto, populist Republicans have largely taken the lead in defending Bitcoin and crypto from critics such as Senator Elizabeth Warren (D-MA), who has become an outspoken critic of digital currencies.
Representative Warren Davidson (R-OH) sent a statement to Forbes this week calling the stalling of the DAME Act “a significant victory” and saying, “the current debt proposal does not include a digital asset mining energy tax.” The DAME Act could resurge in the future.
