The US government has proposed a tax on cryptocurrency miners in an effort to reduce the industry鈥檚 sizeable environmental impact, but experts warn that the move could simply shift the problem elsewhere.
Cryptocurrencies such as bitcoin are kept secure through a process called mining, which involves intense computation and high electricity consumption 鈥� the latest data from the University of Cambridge suggests bitcoin accounts for .
In the US, the government that up to 2.3 per cent of the nation鈥檚 electricity use in 2023 was due to just 137 mining operations, while a 5 per cent rise in electricity costs in Texas has been caused by miners. President Joe Biden鈥檚 points out that cryptocurrency mining has 鈥渘egative environmental effects and can have environmental justice implications as well as increase energy prices for those that share an electricity grid with digital asset miners鈥�.
Advertisement
As such, the budget proposes a 30 per cent tax on miners鈥� total energy costs, applying to both power from the grid and any electricity generated by the miners themselves. It would be phased in, with a 10 per cent charge starting in 2025, a 20 per cent charge in 2026 and, finally, a 30 per cent charge in 2027. An identical tax was proposed by Biden last year, but it failed to pass the House of Representatives and Senate and become law 鈥� hurdles that this second attempt now faces.
The move, which comes as bitcoin has surged to an all-time high above 拢56,000 in recent weeks, has attracted fierce criticism from the cryptocurrency industry. Dennis Porter at the Satoshi Action Fund that it was a 鈥渂ack door ban鈥� on mining and promised: 鈥淲e will aggressively oppose this attempt at targeted discrimination without hesitation!鈥�
New 杏吧原创 approached several large bitcoin mining companies for comment on the proposed tax. Block Mining, Frontier Mining and HIVE Digital Technologies didn鈥檛 respond, while TeraWulf declined to comment.
But taxing the industry could have unintended consequences, says聽 at VU Amsterdam in the Netherlands. When China banned bitcoin mining in 2021, it led to companies moving their operations to countries like聽Kazakhstan, where fossil fuels including coal produce more than 90 per cent of the nation鈥檚 electricity supply.
鈥淚t probably wouldn鈥檛 really solve anything,鈥� says de Vries, as mining operations are highly mobile and can be based anywhere, moving from country to country to find better regulatory environments or cheaper power. 鈥淐limate change is a global problem and if you鈥檙e moving emissions from one country to the next, if you make the power source worse, you鈥檙e actually exacerbating the global problem.鈥�
鈥淚deally, you want to tackle this at a global level,鈥� says de Vries. 鈥淵ou want to cut down the emissions of these miners.鈥� De Vries has long advocated for bitcoin to follow the cryptocurrency Ethereum, which changed the way it operates, doing away with mining and slashing its power consumption by 99.99 per cent. But he says that most bitcoin developers have shown no interest in change.
