Coin Edition -
- The US sets an excise tax to make cryptomining firms pay for the costs they impose.
- The tax will be equal to the cost of electricity used in Bitcoin mining.
- It will be phased in at a rate of 10% each year until it reaches 30%.
The United States government has officially made a landmark decision to mandate miners of crypto assets to pay for the cost implication of their mining activities to society.
In a statement from the White House on Tuesday, the US government discusses how intensive energy consumption from cryptomining firms pushes up electricity prices for consumers and increases risks for local electrical grids, causing service interruptions and safety hazards.
It also noted that cryptomining is geographically mobile and “the stability of the business model remains unclear.” To address this concern, the US government established the Digital Asset Mining Energy (DAME) Tax to encourage firms to “start taking better account of the harms they impose on society.”
According to the report, the excise tax exemplifies the President’s commitment to addressing long-standing national challenges and emerging risks, as in the costs of current practices for mining crypto assets.
Ultimately, the government has decided that firms would face a tax equal to 30% of the cost of the electricity they use in cryptomining. In a supplementary budget explainer paper from the US Department of the Treasury in March, mining companies would pay the excise tax, regardless of whether the resources used were owned or rented.
One of the few surprises in the Biden budget. A proposed excise tax on electricity usage from crypto mining. Phasing in at 10% in year one and climbing to 30%. pic.twitter.com/UPgUdr8CeG— John Buhl (@jbuhl35) March 9, 2023
Notably, the tax would go into effect after December 31, 2023, and be phased in at a rate of 10% each year until reaching its maximum of 30%. According to a recent report from the New York Times, large-scale Bitcoin mines in the US use as much electricity enough to power over 100,000 homes.
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