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

The move, part of the government budget proposal for the next fiscal year introduced in March, it stands in stark contrast to recent pro-crypto statements from former President Donald Trump, who just this week called for the United States to dominate bitcoin mining. It remains to be seen whether the excise tax on cryptocurrency mining will go into effect (or whether Trump, if elected, will maintain his aggressive cryptocurrency policies), although in recent weeks many have begun to argue that President Biden may soften the industry .

See also: Trump’s appeal to Bitcoin miners is a wake-up call for cryptocurrencies to remain apolitical | Opinion

It should be stated that the implementation of a blanket 30% federal tax on digital asset mining will kill the industry and wipe out billions of dollars of value for investors in the United States, and most likely Canada as well, given that the current Canadian federal administration closely follows US regulatory precedents.

Taras Kulyk he is the founder and CEO of SunnySide 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 espoused by the current White House administration. First, they came for your digital mining and you did nothing…

The fine print on Biden’s tax proposal

The huge mining tax, implemented despite billions of dollars invested in the sector, is part of his budget proposal for fiscal 2025, which aims to address environmental concerns and regulate the digital asset mining sector. The proposal suggests the tax would be phased in over three years, starting at 10% in the first year, increasing to 20% in the second year and reaching the full 30% in the third year. This tax only 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 main problem the exact opposite of the economic reality and operational impact for electric companies.

The story continues

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

By targeting a specific sector with an energy consumption tax, the government could be considered in violation of a number of clauses, including: The commerce clause in Article I, Section 8, Clause 3 of the United States Constitution, the Equal protection clause is found in the 14th amendment, the Due process clause contained in the Fifth Amendment to the United States Constitution or under the statute of unintended consequences.

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

How to Kill an Emerging Industry 101

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

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

Additionally, the proposed tax would disproportionately affect smaller digital mining operations, which may not have the resources to absorb the additional costs or relocate to other jurisdictions. This would create a level 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 United States, then they are on the right track.

Environmental concerns and tax ineffectiveness

The Biden administration argues that the proposed tax is necessary to address the environmental impact of bitcoin mining, as it consumes significant amounts of electricity. However, this argument overlooks 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 flaring, which reduces CO2 equivalent emissions by approximately 63% compared to traditional methods of methane flaring and landfill mining, which have the same effect in one year plant five million trees and let them grow for 10 years. Bitcoin mining has been proven to work strengthen networks and even reduce energy costs for local communities.

Indeed, imposing a tax on energy consumption could discourage these efforts and incentivize miners to use less environmentally friendly energy sources abroad. What will happen is a mass exodus of miners from the United States, which has the most renewable energy, and move them abroad where fossil fuels are predominantly used.

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

So what should the government do? Nothing. Let the free market reign. Bitcoin miners are the dung beetles of energy. They go where the energy is cheapest, and given the initial operating expenses of fossil fuel miners and the low operating expenses of renewable energy, it’s easy to see why most mining comes from renewable sources.

Global competition

The bitcoin mining industry is highly competitive, with countries such as China, Russia, and Canada vying for dominance. The proposed tax would undermine 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 sector. Despite the ban, bitcoin mining operations have found new homes in countries with more favorable regulatory environments and access to renewable energy sources. This proved that the Bitcoin network is not geographically limited and can adapt to regulatory changes.

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

Additionally, the tax could have broader implications for the cryptocurrency industry as a whole. By targeting bitcoin mining, the Biden administration could inadvertently discourage innovation and investment in the sector, 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 summary, the Biden administration’s proposed tax on bitcoin mining would have serious negative consequences for the industry and digital economy generally in the United States, and therefore for its own initiatives.

See also: Bitcoin miners show strong reaction against warrantless EIA survey

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

Just as the industry rallied to defeat the unconstitutional EIA investigation, we should pay the same attention here too. You can’t ban Bitcoin mining, you can only ban yourself.

Fuente