The undeniable truth is that the United States has adopted an aggressive approach to regulating cryptocurrencies, despite approving Bitcoin ETFs. This is especially true for the Bitcoin mining industry, which has a rich history dating back to the early days of Bitcoin. However, the government seems determined to destroy the industry, even though it operates on a cleaner energy grid compared to most countries.
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 in March. This proposal aims to impose a 30% excise tax on the cost of electricity used for Bitcoin mining. The proposal, known as the Digital Asset Mining Energy tax (DAME), could potentially drive American Bitcoin miners, such as RIOT Platforms and Marathon Digital Holdings, to leave the country.
Wyoming Republican Senator Cynthia Lummis expressed her concerns about this tax, stating that it would destroy any foothold the industry has in America.
Robert F. Kennedy Jr. and many others have criticized Biden’s proposal for a Bitcoin mining tax.
The DAME tax was initially proposed by the Biden administration in May 2023 but was quickly rejected by lawmakers and industry leaders. However, it has resurfaced as part of the fiscal 2025 budget proposal, set to take effect on October 1. The administration claims that this tax would raise $3.5 billion over a decade, with the tax rate gradually increasing from 10% to 30% over three years.
The White House has stated that its intention is to make miners pay their fair share of costs imposed on local communities and the environment. However, it fails to mention that the U.S. 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%.
The administration’s plan could backfire, as it may lead to the demise of the entire industry. Less efficient miners may go out of business or move to countries with dirtier energy standards. Even clean energy miners may struggle to survive, depriving the industry of the opportunity to adopt environmentally friendly practices.
This would result in job losses and reduced tax revenue, contradicting Biden’s promise of increased revenue. The administration even acknowledges that the U.S. Bitcoin mining industry could relocate to areas with dirtier energy production.
Instead of showing strong leadership that aligns with the American spirit, the administration points to China and other countries that have restricted crypto asset mining as examples. It wouldn’t be surprising if Biden proposed a total ban on mining if his tax doesn’t pass.
Biden has disappointed American Bitcoin miners and investors. 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 voting bloc, especially in coastal states with strong Democratic constituencies. Shelving the DAME tax could help Democrats secure votes that would otherwise go to Robert F. Kennedy Jr., who has shown a friendlier approach to Bitcoin than Biden or former President Trump.
Reconsidering this proposal would be in the best interest of America and the world.
Kadan Stadelmann, the guest author of this article, is the chief technology officer for the Komodo Platform and has a background in information technology and scientific computing.
Please note that this article is for general information purposes only and should not be considered legal or investment advice. The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Cointelegraph.