Biden’s crypto mining tax simply wouldn’t work in the UK... or the US, for that matter
Thursday 04 May 2023 11:53 am Biden’s crypto mining tax simply wouldn’t work in the UK… or the US, for that matter
US President Joe Biden has unveiled plans for a proposed massive tax levy on electricity used by cryptocurrency miners.
The proposal, which would see crypto mining operations face a 30 per cent tax on energy, could be implemented by next year if it is approved by the US government.
The Digital Asset Mining Energy (DAME) excise, according to a White House document, has been designed to tackle “negative spill-overs on the environment” and ensure mining operations pay for the “full cost they impose on others”.
It comes only weeks after a heavily-criticised New York Times article pointed an incriminating finger of blame at the environmental impact of the cryptocurrency industry. It appears the same sentiment from the NYT report is being reflected by the Biden administration.
However, UK crypto and blockchain expert Jason Deane has scoffed at Washington’s proposals, and reassured tech industry leaders that a similar taxation could not be implemented by the British government.
“Here in the UK, Bitcoin mining is next to non-existent in terms of drawing form the gird because power costs are such that it is simply not economical,” explained the experienced Bitcoin miner.
“While the UK government may well consider the same idea, the reality is that the impact would be zero.”
Deane also said the tax proposals revealed a profound lack of understanding within the White House, explaining the ethos of the levy used “biased and oversimplified headline data from parties with a vested interest”.
“Consider, for example, the New York Times article on Bitcoin mining last month which has since been heavily criticised and largely disproved for poor, one-sided research,” he added.
“Statements made by the White House are embarrassingly inaccurate and include wild claims that appear to be designed to appeal to a voter base that is uneducated on the subject. In my view, this is a purely political manoeuvre rather than being environmentally or economically led.”
He did, however, warn the bill has a reasonable chance of becoming law due to the current mood of the House and Senate towards digital assets.
“The likely effect of it passing would be capital flight from the country as miners relocate elsewhere, something it is relatively easy for them to do,” he said.
“This means income from the bill would likely be close to zero, but the cost to the US economy in terms of job losses, investment losses at retail and institutional level would be significant.”
Worse, explains Deane, is that the positive impact Bitcoin mining is having on grid stabilization, driving renewable power generation and reducing methane emissions would also be lost, likely setting the US back against its own environmental targets.
“It’s worth noting that it would have literally no effect on the Bitcoin network, being immune, as it is, to even the largest country’s attempts to stop it. China failed to do so, despite employing draconian measures. Put simply, the US has no chance at all. It can either embrace and work with this new technology or it will simply lose its relevance in the new financial world.
“There are also practical questions. As much as 30% of Bitcoin mining (globally) is off grid according to Daniel Batten, one of the industry’s foremost and most respect researchers on the subject.
“Will standalone projects be taxed as well? What about projects running at 100% renewable energy built primarily for that purpose, but also contributing to the grid? Will they been taxed to the point of shutting down? If so, where will that power come from? Fossil fuels? If so, this lays the true political motivations bare, rather than any economic or environmental case.”
His feelings were echoed by Dr Stephen Castell – an independent ICT professional.
“I doubt it would be feasible, technically or legally,” Dr Castell said.
“Are they going to introduce an obligation for anyone running any application on a computer – that would include everyone using a smartphone or a laptop or a tablet or a mainframe/server – to self-declare on a tax return that one of the applications is ‘bitcoin mining’?
“Forget it, this is a daft proposal, surely – even if that is what the US tabled idea is and it passes into tax law, there would be almost universal avoidance/evasion, making it unworkable to police, probably.”