In an effort to address the environmental and economic costs associated with cryptocurrency mining, the White House has introduced the Digital Asset Mining Energy (DAME) excise tax as part of the President’s Budget for Fiscal Year 2024.
This proposal would require firms to pay a tax equal to 30% of the cost of electricity used in mining after a phase-in period. The introduction of this tax reflects the President’s commitment to addressing both long-standing national challenges and emerging risks.
White House advisors discuss the hidden costs of crypto mining
Cryptocurrency mining has significant environmental and economic consequences. The process requires considerable amounts of energy, leading to negative effects on the environment, quality of life, and electricity grids.
Pollution from electricity generation disproportionately impacts low-income neighborhoods and communities of color.
Additionally, crypto mining drives up electricity prices for consumers and increases the risk of service interruptions and safety hazards for local electrical grids.
Despite consuming vast amounts of energy, crypto mining has not generated substantial local and national economic benefits. Instead, the energy is used to create digital assets with unclear social benefits.
Local communities have seen little evidence of positive impacts in terms of employment or economic opportunity. Moreover, research indicates that minor increases in local tax revenue are more than offset by increased energy prices for firms and households.
International efforts to regulate crypto mining
As concerns over the potential relocation of crypto mining to countries with dirtier energy production grow, several countries have already taken steps to regulate the industry.
For example, in 2021, China instituted a complete ban on cryptocurrency mining, and eight other countries have followed suit with comparable actions.
Additionally, three Canadian provinces have announced or enacted moratoriums on the activity. In the United States, some states and localities have implemented higher electricity prices or restrictions on mining.
To prevent the relocation of crypto mining from one community to another, a national policy like the DAME tax is needed.
This tax is just one example of the President’s larger efforts to fight climate change, reduce energy prices, increase access to electrified options, ensure responsible development of digital assets, modernize their tax treatment, and mitigate financial stability risks.
Economic implications of the DAME Tax
The DAME tax is estimated to raise $3.5 billion in revenue over ten years. Its primary goal is to make crypto miners pay their fair share of the costs imposed on local communities and the environment.
However, it is important to note that the DAME tax is not a panacea. It is only one example of the Administration’s efforts to address the various challenges posed by the growing digital asset industry.
The proposed DAME tax demonstrates the White House’s commitment to addressing the economic and environmental costs of cryptocurrency mining.
By implementing a national policy, the administration aims to ensure that crypto miners contribute to the costs they impose on local communities and the environment, ultimately promoting a more sustainable and responsible approach to digital asset mining.