A hot potato: The Biden administration is pushing to impose a 30% tax on electricity used by cryptomining operations. The White House says the extra bill is a result of the harm cryptomining causes the environment, the high energy prices, and its lack of benefits.
In an online post, the White House's Council of Economic Advisers (CEA) proposed the Digital Asset Mining Energy (DAME) excise tax for the fiscal year 2024 budget. It states that the tax addresses the economic and environmental costs of current practices for mining crypto assets. The tax would be introduced in phases across three years, starting at 10% next year, then rising to 20%, and finally to 30%. It's expected to generate around $3.5 billion over a decade.
The CEA wants to introduce the tax because "currently, cryptomining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate."
The White House highlights a New York Times report that states the amount of power used by 34 of the largest cryptomining operations equals the power used by the surrounding 3 million homes. It adds that the amount of electricity used in cryptomining in the United States in 2022 was similar to what is used to power all the country's home computers or residential lighting.
The post goes on to say that the energy consumption associated with cryptomining has negative spillovers on the environment, quality of life, and electricity grids. Moreover, pollution from electricity generation falls disproportionately on low-income neighborhoods and communities of color.
Also read: What is Crypto Mining? How is this all happening?
Yahoo News notes that other industries that use a lot of electricity, such as chemical and steel, aren't being taxed for their electricity use. The White House said it's because these industries are vital to the economy, supplying jobs and other essentials, while volatile crypto can pose risks to the financial system. "At the same time that the benefits [of cryptomining] have not been fully documented, there are concerns about risk to financial stability, and certainly the environmental concerns," said the White House.
Many countries' governments share the US' concerns about environmental and other issues stemming from cryptomining. China banned it in 2021 - which led to the US becoming the new global mining leader - as have eight other countries. Elsewhere, several US states now restrict cryptomining or charge higher electricity prices for the practice.