The Biden administration recently reintroduced a proposal that would place a 30% tax on all “cryptocurrency miners” – a movement that represents an ideological witch hunt against a rapidly growing industry (see my previous comments).

The change, part of the government budget proposal for the next fiscal year introduced in March, stands in stark contrast to recent pro-crypto statements from former President Donald Trump, who this week called for the US to dominate the bitcoin mining sector. It remains to be seen whether the special tax on cryptocurrency mining will take effect (or whether Trump will enforce his aggressive crypto policies if elected), although in recent weeks many have begun to argue that President Biden may be going soft on the industry.

See too: Trump’s appeal to Bitcoin miners is a warning for crypto to remain apolitical | Opinion

It must be stated that the implementation of a 30% federal blanket tax on digital asset mining will kill the sector and wipe billions of dollars off investor value in the United States, and very likely in Canada as well, given the way the current Canadian federal administration closely follows US precedents in regulatory matters.

Taras Kulyk is founder and CEO of Sunny Side Digital.

Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

In the “land of the free,” this type of heavy-handed, Stalinist central planning directive screams in the face of the democratic ideals (ironically) that should be upheld by the current White House administration. First, they came for your digital mining and you did nothing…

The fine print of Biden’s proposed tax

The egregious mining tax, implemented despite billions of dollars invested in the sector, is part of its fiscal year 2025 budget proposal, which aims to address environmental concerns and regulate the digital asset mining industry. The proposal suggests that the tax would be introduced gradually over three years, starting at 10% in the first year, increasing to 20% in the second year and reaching 30% in the third year. This tax exclusively harms digital mining, and not data centers in general.

The administration argues that the tax is necessary to combat the environmental impacts of cryptocurrency mining, including its high energy consumption and the potential for increased energy prices for communities hosting mining operations, in light of well-established research that This line of concern is the exact opposite of economic reality and the operational impact for energy companies.

The story continues

Although I am not a lawyer and these arguments should be taken with caution, it is important to note that it is likely unconstitutional for a presidential administration to tax the energy use of a specific industry. There is simply no precedent for this.

By targeting a specific industry with an energy consumption tax, the government could be seen as violating a number of clauses, including The commercial clause in Article I, Section 8, Clause 3 of the U.S. Constitution, the Equal Protection Clause found in the 14th amendment, the Due Process clause found in the Fifth Amendment of the U.S. Constitution or under the unintended consequences status.

Furthermore, there are ethical implications at play that go beyond any potential unconstitutional excess. This type of deception has become all too common and is something the US founders were aware of and tried to prevent through the Constitution itself.

How to kill an emerging industry 101

The tax proposed by the Biden administration would impose a significant financial burden on digital mining companies, most likely making their operations economically unviable. Given that these companies already face intense competition and tight margins, this tax would only worsen financial difficulties and lead to material losses for investors.

As a result, many mining companies would likely be forced to close or relocate to other countries with more favorable tax policies, leading to job losses and reduced economic activity in the United States.

Furthermore, the proposed tax would disproportionately affect smaller digital mining operations, which may not have the resources to absorb the additional costs or to relocate to other jurisdictions. This would create an uneven playing field, favoring larger, more established mining companies and stifling competition and innovation in the sector, as well as increasing centralization for larger operators.

If this administration’s goal is to harm small businesses, stifle innovation and develop a reputation for reducing economic activity in the US, then they are on the right track.

Environmental concerns and the ineffectiveness of the tax

The Biden administration claims the proposed tax is necessary to address the environmental impact of bitcoin mining, as it consumes significant amounts of electricity. However, this argument ignores the fact that many mining operations already use renewable energy sources and are actively working to reduce their carbon footprint.

Furthermore, the proposal does not take into account the use of methods such as methane burning, which reduces CO2 equivalent emissions by around 63% when compared to traditional methods of burning methane and mining in landfills, which in one year have the same effect of plant five million trees and let them grow for 10 years. It has been proven that Bitcoin mining strengthen networks and even reduce energy costs for local communities.

In fact, imposing a tax on energy consumption could discourage these efforts and encourage miners to use less environmentally friendly energy sources abroad. What will happen is a mass exodus of miners out of the US, which has the largest renewable energy composition, and transfer them abroad, where fossil fuels are more predominantly used.

The fact is that, about 90% of carbon emissions come from outside the United States. Since addressing “environmental concerns” is a global problem, they would only be contributing to the problem through their own logic.

So what should the government do? Anything. Let the free market reign. Bitcoin miners are the energy beetles. They go where energy is cheapest, and given the initial operating expenses of fossil fuel miners and the low operating expenses of renewables, it’s easy to see why most mining comes from renewable sources.

Global competition

The bitcoin mining industry is highly competitive, with countries like China, Russia and Canada vying for dominance. The proposed tax would harm the United States’ position in this global race, as it would make the country a less attractive destination for mining operations. This could result in a significant loss of investment, talent and technological advances, ultimately weakening the United States’ role in the digital economy.

A lesson learned later China banned bitcoin mining in 2021 it was the resilience and adaptability of the bitcoin mining industry. Despite the ban, bitcoin mining operations have found new homes in countries with more favorable regulatory environments and access to renewable energy sources. This demonstrated that the Bitcoin network is not geographically confined and can adjust to regulatory changes.

Furthermore, the shift to more sustainable energy sources has highlighted the potential for bitcoin mining to positively contribute to the global energy transition.

Furthermore, the tax could also have broader implications for the cryptocurrency industry as a whole. By targeting bitcoin mining, the Biden administration may inadvertently discourage innovation and investment in the industry, which could have far-reaching consequences for the country’s technological development and competitiveness.

You can’t ban mining, you can only ban yourself

In short, the Biden administration’s proposed tax on bitcoin mining would have serious negative consequences for the industry and the broader digital economy in the United States, and therefore for its own initiatives.

See too: Bitcoin Miners Show Resistance Against Unwarranted EIA Survey

It would impose a significant financial burden on mining companies, discourage sustainable mining practices and harm the country’s competitiveness in the global market. This type of measure is more in line with oppressive countries like China or the USSR, and it is incredibly disheartening to see this in the United States.

Just as the industry came together to defeat the unconstitutional EIA research, we must place the same attention here. You cannot ban Bitcoin mining, you can only ban yourself.

Fuente