The Council of Economic Advisers indicated that it would advocate for a 30% tax on cryptocurrency mining to offset its environmental impact. The new tax is known as the DAME tax, and it will be phased in gradually.
The Council of Economic Advisers published an official announcement regarding the Biden administration’s attempt to tack a 30% tax on crypto mining. The latter believes the crypto industry and the process of mining have a significant negative impact on the environment due to the use of electric energy and others. Furthermore, they believe this issue must be addressed.
Dame – Proposed by The CEA
The new excise tax called DAME stands for Digital Asset Mining Energy. This tax attempts to hold cryptocurrency companies accountable for the negative impact on the environment. Over the past years, there have been frequent discussions about the environmental costs. Besides the United States, other countries have also deliberated related actions.
The Council of Economic Advisors proposed the tax, and it will come into effect after a phase-in period. The tax charges 30% of the cost of electricity miners use. The CEA believes this tax is necessary because, currently, crypto mining firms
“do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate.”
The CEA used as a reference an article by the New York Times. This article spoke of the impact of 34 crypto mining operations, and the cryptocurrency industry criticized it. In addition, the post mentioned there are also environmental impacts even when they use clean energy sources for mining.
Crypto Community Calls DAME Unfair
According to the cryptocurrency mining community DAME tax is unfair. In addition, they think the tax does not incentivize the use of clean energy. Criticism for the structure of this scheme also came from people outside of the crypto community that is not affected by this tax.
Pierre Rochard – Riot Platforms’ VP of Research, also criticized the New York Times report. He stated that it was
“the worst moment imaginable for the White House to be drawing attention” to Bitcoin.
This is the worst moment imaginable for the White House to be drawing attention to #Bitcoin, the Streisand effect is going to accelerate adoption as people seek a decentralized alternative to the failing legacy fiat system. https://t.co/67ydPQdqc0
— Pierre Rochard (@BitcoinPierre) May 3, 2023
In addition, he criticized the current state of the global financial system, more specifically, the banking system. At the same time, others focused on the fact that other industries are equally to blame for some of the issues raised in the post.
The same people who tell you that plugging a bitcoin miner into an electrical outlet is destroying the planet will also tell you that plugging your electric car into that same outlet is saving the planet.
— Josh Hendrickson (@RebelEconProf) May 3, 2023
Pushbacks to Crypto Mining in the U.S.
Since China banned crypto mining, bitcoin mining has increased in the United States. Bitcoin mining firms beat tech stocks in 2023, with Core Scientific leading the way.
However, the cryptocurrency mining environment is changing continuously. North Carolina has discussed about the possibility of imposing a crypto mining moratorium on crypto mining. This discussion took place only a short time after Texas removed mining-related incentives.