Although taxation is controversial, that backlash does not discourage its implementation. Like the controversial decision to establish mortgage fees to aid communities who need help, the Biden administration has proposed to tax crypto-miners in an attempt to lessen their role in the environmental crisis. The following defines crypto-mining and introduces the proposal: Digital Asset Mining Energy (DAME) excise tax and the concerns that follow it.
Definitions
Cryptocurrency is a digital currency that does not have a “central authority,” as the U.S. dollar does, to maintain its value. The most popular form of cryptocurrency is Bitcoin. According to “Climate and Energy Implications of Crypto-Assets in the United States,” Bitcoin makes up approximately 60% to 77% of the electricity usage of the global crypto-asset. In order to have this digital currency, Crypto-mining is necessary. Crypto-mining is how new cryptocurrency is created. Clearly put by Capital.com, like “gold miners who spend time and effort to obtain the precious metal, cryptocurrency miners are required to work hard and use electricity to power the process of crypto creation. ”
DAME Explained
In the Budget for Fiscal Year 2024, President Biden proposed a Digital Asset Mining Energy (DAME) excise tax, which will tax firms approximately 30% of their energy usage cost. According to the White House, today “crypto-mining firms do not have to pay for the full cost they impose on others,” but the proposal aims to change this in an attempt to decrease crypto-mining’s energy usage. Although the environmental crisis is a result of many other polluters alongside crypto-currency, crypto-mining emissions are higher than other countries’ emissions: with U.S. Crypto-assets being 27.78% of Global Crypto-Assets’ annual energy usage (Figure 2.1).
Concerns
One major concern with this proposal is that banning crypto-mining will encourage miners to mine outside of the U.S. where they will not be taxed for their energy usage. If miners avoid taxation by going to countries or states that will not tax them (as much) for their excess electricity usage, the proposed bill will fail to lessen the environmental crisis. Many are concerned that it would not only fail to reduce the crisis but would worsen matters by making cryptocurrency transactions slower and more vulnerable to security issues, and thus, decrease cryptocurrency’s value.
Moreover, while there is a growing need to decrease greenhouse gasses, the problem is figuring out how to reduce the harm without worsening circumstances. If the proposal is passed, it would decrease crypto-miner’s energy usage in an attempt to put a stop to its disproportionate environmental impact on low-income and communities of color (Thind et al. 2019) and attempt to decrease pollution and greenhouse gasses as a whole. Although the proposed taxation is being met with backlash from the mining and cryptocurrency communities, it is important to find ways to reduce our carbon emissions because the environmental crisis impacts everyone. Even if it does not impact wealthier communities now, it will eventually if society does not address the problem and actively work to resolve its harm on the environment.