It is undeniable that the United States has taken an aggressive stance on cryptocurrency regulations, even though they have given the green light for Bitcoin ETFs. This aggressive approach is especially evident in the treatment of the Bitcoin mining industry, which has been around since the early days of Bitcoin. Despite operating on a cleaner energy grid compared to most countries, the federal government seems determined to destroy the industry.
Instead of adopting a business-friendly approach or recognizing the value brought by a domestic Bitcoin mining industry, the Biden administration has reintroduced a controversial proposal to impose a 30% excise tax on the cost of electricity used for Bitcoin mining. This proposal, known as the Digital Asset Mining Energy tax (DAME), could drive American Bitcoin miners, such as RIOT Platforms and Marathon Digital Holdings, to relocate outside of the country.
Senator Cynthia Lummis, a Republican from Wyoming, has expressed concerns about the proposed tax, stating that it would eliminate any foothold the industry has in America.
The Biden administration first proposed the DAME tax in May 2023, but it was quickly rejected by lawmakers and industry leaders. However, it has now resurfaced as part of the fiscal 2025 budget proposal, set to take effect on October 1. The administration claims that the tax would generate $3.5 billion over a decade, with the tax rate increasing from 10% in the first year to 30% by the third year.
The White House argues that the tax is intended to make miners pay their fair share of costs and environmental impacts. However, it fails to mention that the US has become the world’s largest Bitcoin mining market, with the sector accounting for 37.8% of global Bitcoin mining in 2022, up from 3.4% previously.
Implementing such a tax could backfire on the Biden administration, as it may lead to the demise of the industry and result in job losses and reduced tax revenue. Less efficient miners may be forced out of business or pushed to countries with less environmentally friendly practices. Even clean energy miners could suffer, undermining the industry’s efforts to adopt sustainable practices.
Rather than demonstrating bold leadership that aligns with the American spirit, the administration cites other countries, including China, that have restricted crypto asset mining. This raises concerns that Biden may consider a total ban on mining in the future if the tax proposal fails.
It would be wise for the administration to seek industry feedback before moving forward with the DAME tax. Crypto advocates are an informed and active voter bloc, particularly in coastal states with strong Democratic constituencies. Shelving the tax could help Democrats secure votes that might otherwise go to Robert F. Kennedy Jr., who has shown a friendlier approach to Bitcoin than Biden or former President Trump.
Reconsidering the proposal would also be in the best interest of America and the world as a whole.
Kadan Stadelmann, the Chief Technology Officer for the Komodo Platform, is a guest author for Cointelegraph. He holds a degree in information technology from the University of Vienna and has a background in technical informatics and scientific computing from the Berlin Institute of Technology. He joined the Komodo team in 2016.
This article serves as general information and should not be taken as legal or investment advice. The opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.