President Biden proposes a 30% tax on cryptocurrency energy

Cryptocurrency has been the bane of PC gamers for years, as “mining hardware” built around high-end consumer graphics cards created a massive shortage of GPUs. But crypto mining has even more disastrous implications for the environment, as astonishing amounts of electricity gets devoted to creating digital coins. After years of relative inaction from the US federal government, President Joe Biden is proposing a steep tax on energy used for crypto mining.

Biden laid out his plan this week in a direct proposal to American legislators. The DAME Act sounds like something that Sam Spade might write if he quit being a private eye and ran for Senate, but the odd acronym stands for Digital Asset Mining Energe excise tax. Citing the environmental impact of electrical energy production as well as higher energy prices for everyone else, DAME’s final result would be a massive 30 percent tax on the energy used for cryptocurrency mining.

“Alongside these known costs and risks, cryptomining does not generate the local and national economic benefits typically associated with businesses using similar amounts of electricity,” says the proposal. “Instead, the energy is used to generate digital assets whose broader social benefits have yet to materialize.” The post on the White House’s official website cites a report from the US Energy Information Administration showing crypto mining taking up more kilowatt-hours than personal computers did in 2022, just behind televisions and lighting. Estimates for worldwide cryptocurrency energy production put it as high as 240 terawatt-hours per year — about as much electricity as used by the entire country of Australia.

The DAME Act is not the first time that US government entities have attempted to directly legislate cryptocurrency mining, either to curb it or boost it. Though laws pertaining to crypto are still in their infancy, cryptocurrency can be considered either securities or commodities on the federal level, and is therefore subject to taxes based on its value in US dollars. Cryptocurrency exchanges are covered under the Bank Secrecy Act and other federal financial laws. One of the Biden administration’s priorities has been creating a more comprehensive national policy on cryptocurrency regulation. According to Bloomberg Law, dozens of new bills addressing cryptocurrency have been introduced in the House of Representatives and the Senate.

Some individual states are also engaging in the cryptocurrency market. A few have restricted their involvement to defining terms of currency transfer that allow them to engage with the regulatory framework, and some state courts have simply defined crypto exchanges as money transmissions under existing laws. Some have gone further: In Texas, where relatively low electricity costs have attracted cryptocurrency miners and crypto “farms,” the state Senate has proposed a bill that will allow the electrical grid operator to more closely regulate crypto miners’ activities and energy credits.

The impact of cryptocurrency production on the electrical grid has become an international issue. In addition to massive amounts of energy being legally converted into digital assets, without generating (as the White House puts it) “the local and national economic benefits typically associated with businesses using similar amounts of electricity,” illegal cryptocurrency farms have been discovered tapping into the electrical grid to steal power, and botnets often try to siphon off computer power from infected PCs for cryptocurrency mining. China and a few other countries have outlawed cryptocurrency exchanges, though more out of a desire to regulate money transfers than to curb electrical use.

Despite growing interest in cryptocurrency regulation, Biden’s DAME Act has little chance of becoming federal law in the short term. With Republicans in control of the House of Representatives and Democrats in control of the Senate, both on razor-thin margins, passing any legislation at the moment is bitterly contentious. Impactful policy changes on this level will almost certainly have to wait until after the next election cycle in 2024, assuming one party or the other gains more complete control of the legislative and executive branches.