The United States proposes a tax on electricity used to mine cryptocurrencies
Cryptocurrencies experienced a price and demand boom during the Covid-19 pandemic. Many people working from and looking for things to do with their extra time, and others looking to earn some extra money or money to survive by not having a job compatible with the pandemic. Bitcoin and Ethereum hit all-time highs in late 2021 before falling significantly in 2022, but sizable cryptocurrency mining operations still remain.
For this reason, the administration of Joe Biden intends to put a new tax on electricity used for cryptocurrency mining. According to the administration, crypto mining operations have an outsized impact on energy consumption in the United States. This would especially affect Bitcoin and other cryptocurrencies that use Proof of Work.
Cryptocurrency mining would be somewhat more expensive in the United States
As part of its fiscal year 2024 budget, the White House is proposing a 30% tax on the electricity used for cryptocurrency mining operations. The Digital Asset Mining Energy Tax would come into effect on December 23, 2023 and would be applied gradually. It would start at 10 percent in the first year, increase to 20% in the second year, and reach 30% in the third year. It is estimated that it could generate revenue of $3.500 billion in the first decade of its enactment.
The White House says that "increased energy consumption attributable to the growth of digital asset mining has negative environmental effects and may have environmental justice implications, as well as increasing energy prices for those who share a power grid with digital asset miners«.
This tax would make citizens bear the consequences of increased energy demand from cryptominers in the form of higher fees to offset the costs of energy producers. The administration also notes that the volatility of cryptocurrency mining can have other consequences. The idea is that these large consumers of energy pay the bill through higher taxes. The tax is expected to be enough to deter cryptominers in a market that has already seen profitability fall.
For example, figures from the US Energy Information Administration show that refrigeration accounts for the largest share of electricity consumption, at 85.000 billion kilowatt hours (kWh) by 2022. Lighting is second, at about 65 million kWh, and televisions the third, with just over 50 kWh. The surprising entry on the list is cryptocurrency mining, which consumed 50 million kWh in 2022 and ranked fourth. The 34 largest cryptocurrency mining operations in the United States consume electricity in one year Enough to supply three million homes.
Source: Tom's Hardware
