Why did the US authorities cancel the bitcoin mining tax?

In the United States, the idea of ​​imposing an additional tax of 30% on the industrial cryptocurrency mining business was previously abandoned, and, according to industry representatives, this can become a powerful driver for the development of the digital economy, writes RBC Crypto.

After negotiations between US President Joe Biden and Speaker of the House of Representatives Kevin McCarthy, an agreement was reached to raise the national debt ceiling until January 2025. By raising the debt ceiling, the government can borrow more money to meet its financial obligations and prevent a potential default.

Earlier, the presidential administration proposed, as part of the preparation of the budget for 2024, to introduce an excise tax on bitcoin mining in the amount of 30% of the cost consumed for the production of electricity cryptocurrency. According to Republican Congressman Warren Davidson, a clause on the proposed tax was removed from the bill describing the conditions for raising the national debt ceiling.

In early May, the White House proposed a tax on electricity used by cryptocurrency miners called the Digital Assets Mining Energy (DAME) Electricity Excise. The proposal called for a 10% tax on the use of electricity by miners from 2024, gradually increasing it to 30% by 2026.

Politicians pointed to the significant consumption of electricity by miners and criticized its negative impact on the environment. According to the presidential administration, DAME could bring in $3.5 billion in revenue within 10 years. The initiative provoked a backlash from major US mining companies, who assessed it as an attempt to marginalize the cryptocurrency community and force the crypto business out of the country.

For the bill to become law, it still needs to be approved by the House of Representatives and the Senate. Neither the White House nor the US Treasury have yet confirmed that the mining tax has indeed been abandoned, but Davidson again declared about this in a comment for Forbes. “The current public debt proposal does not include an energy tax for mining digital assets. We opposed this tax, and I consider it a significant victory,” the politician told reporters.

Strategic industry

The share prices of the largest US companies involved in the mining of cryptocurrencies rose against the background of the news. Market leader Riot Platforms (RIOT) surged 10%. Shares of Iris Energy, Hive Blockchain, Cleanspark, Hut 8 Mining and Marathon Digital Holdings also gained 5% or more.

Riot Platforms, one of the world’s largest public bitcoin mining companies, has openly criticized the proposed tax. In a commentary for the Blockworks publication, its representative wrotethat the US should become the world leader in the development of bitcoin infrastructure.

According to Ogienko, “The United States is strengthening the dollar with cryptomining.” This industry, according to a BitRiver representative, will become strategic for the United States in order to maintain a leading position in the digital economy and attract high-tech investments on the world stage. It is likely that the proposed restrictions and the increase in tax rates for miners will not be accepted and introduced, the expert believes.

The industry of industrial mining in the USA, obviously, received a new impetus for development. According to BitRiver, over a three-year horizon, investments in new data centers in the United States with a total capacity of 5 GW may exceed $12 billion. Currently, the capitalization of the industrial mining market in the United States is up to $10 billion and has great potential for growth. However, in Russia these indicators can be exceeded, and industrial mining can become a driver for the development of the digital economy and increase the welfare of the population, subject to reasonable regulation, the expert believes.