What Was the Digital Asset Mining Energy Tax?

The Biden administration introduced the Digital Asset Mining Energy (DAME) tax in 2023. It would have implemented an excise tax of up to 30% of 澳洲幸运5官方开奖结果体彩网:cryptocurrency miners’ electricity costs to counteract their impact on climate change. The proposal failed during debt ceiling negotiations in 2023.

In 2024, the U.S. 澳洲幸运5官方开奖结果体彩网:Energy Information Administration estimated that 澳洲幸运5官方开奖结果体彩网:crypto mining in the United States represents up to 2.3% of all U.S. electricity consumption.

Tax Reporting

If the proposal had passed, digital asset mining companies would have been required to report the amount and type of electricity they used during their mini🧸ng process. They would also give details on the source of their electricity. Firms leasing computational capacity for mining would have been required to report the value of electricity used by external cu💟stomers.

Former President Joe Biden’s 澳洲幸运5官方开奖结果体彩网:proposed tax on crypto mining would have affected Bitcoin (BTC) more than the rest of the crypto market in 2023, as it was the largest blockchain network using 澳洲幸运5官方开奖结果体彩网:proof-of-work (PoW) consensus.

Ethereum (ETH), the world’s second-largest crypto network by market capitalization, switched from a PoW consensus to 澳洲幸运5官方开奖结果体彩网:proof of stake (PoS) in its September 2022 澳洲幸运5官方开奖结果体彩网:merge upgrade. That upgrade led to Ethereum’s energy usage dropping by more than 99%.

The U.S. Council of Economic Advisers stated the DAME tax was an example of the president’s broader efforts to ensure the responsible development of 澳洲幸运5官方开奖结果体彩网:digital assets and to modernize 澳洲幸运5官方开奖结果体彩网:crypto taxation.

The U.S. Treasury’s 2024 revenue proposals described the tax as follows: “Any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30% of the costs of electricity used in digital asset mining.”

Mining Costs and Profitability

Miners acquire high-tech mining rigs and build and maintain their mining farms, incurring more costs than high electricity bills during operations. Taxing the industry’s electricity use affects mining profitability.

Miners' costs and cryptocurrency market swings affect the industry. The crypto bear market in 2022 put pressure on the mining industry, with firms struggling with debt and lower income due to the falling price of cryptocurrencies. From December 2022 to February 2023, 澳洲幸运5官方开奖结果体彩网:three miners went🌼 bankrupt or organized debt restructurings due to the stress oﷺn their finances.

Riot Platforms Inc. (RIOT) produced 639 BTC in April 2023. The coins were created at its massive Rockdale Facility, which runs a fleet of over 95,000 miners.

In its first-quarter 2023 earnings report, Riot posted a net loss of $55 million on revenue of $73 million, highlighting margin pressures. Riot also reduced its power consumption during extreme heat conditions in September 2023, forgoing revenue so that the grid it operates did not fail.

Energy Consumption

Cryptocurrency has proved profitable so a tax on energy use might prompt miners to move operations abroad to tax-friendly countrie𝔉s.

However, changing mining locations doesn't reduce energy consumption globally or change carbon output. It might only place the burdens of high energy use and unnecessary pollution on another country.

Mining farms use vast amounts of energy. For example, if one miner consumes 3,250 watts, it would use 78,000 watt-hours per day (3,250 watts × 24 hours). A farm of 94,000 of these miners would consume 7.332 billion watt-hours (GWh) per day (7.332 million kWh). A tax rate of $0.10 per kWh, equals about $2,200 per day in taxes.

The Energy Information Administration estimates that about 0.855 pounds of carbon dioxide (CO₂) is emitted per kilowatt-hour. This farm would contribute close to 6.3 million pounds of CO₂ per day.

The Bottom Line

The Digital Asset Mining Energy (DAME) tax was a failed proposal introduced in 2023 under President Biden. It would have imposed a hefty fee for mining, creating profitability issues for miners. It aimed to reduce the industry’s impact on the climate.