Strengthening the dollar with mining. Why the U.S. removed the tax on Bitcoin mining

Strengthening the dollar with mining. Why the U.S. removed the tax on Bitcoin mining

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Author: Robert Strickland (crypto-journalist)
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"Strengthening the dollar with mining." Why the U.S. removed the tax on Bitcoin mining


The U.S. has tentatively dropped the idea of imposing an additional 30% tax on the business of industrial cryptocurrency mining, and according to industry representatives, this could be a powerful driver of the digital economy.

After talks between U.S. President Joe Biden and House Speaker Kevin McCarthy, an agreement was reached to raise the national debt ceiling until January 2025. By raising the debt ceiling, the government can borrow more money to meet its financial obligations and prevent a potential default.

Earlier, the President's Administration proposed an excise tax on bitcoin mining of 30 percent of the value of the electricity consumed to mine the cryptocurrency as part of the 2024 budget preparation. According to Republican Congressman Warren Davidson, the proposed tax was removed from the bill describing the conditions for raising the national debt ceiling.

"Yes, one of the victories is blocking the proposed tax," he said in response to a comment by Pierre Rochard, a spokesman for U.S. mining company Riot Platforms, who noted the lack of mention of a tax on miners in the bill.

In early May, the White House proposed a tax on electricity used by cryptocurrency miners, called the Digital Assets Mining Energy Excise Tax (DAME). The proposal called for a 10% tax on electricity use by miners starting in 2024, gradually increasing to 30% by 2026.

Politicians pointed to the significant electricity consumption by miners and criticized its negative impact on the environment. The presidential administration estimated that DAME could generate $3.5 billion in revenue over 10 years. The initiative prompted a backlash from major U.S. mining companies, who viewed it as an attempt to marginalize the cryptocurrency community and drive the crypto business out of the country.

"The document on increasing the U.S. national debt, which is now widely covered in the media, is only a draft, so it will be finalized, additions will be made to it," recalled Oleg Ogienko, director for interaction with government agencies of the Russian mining company BitRiver.

For the draft to become law, it still has to be approved by the House of Representatives and the Senate. Neither the White House nor the U.S. Treasury has yet confirmed that a tax on mining has indeed been abandoned, but Davidson reiterated this in a commentary for Forbes. "The current state debt proposal does not include an energy tax for mining digital assets. We opposed that tax, and I consider that a significant victory," the politician told reporters.

A strategic industry
Stock prices of major U.S. cryptocurrency mining companies rose on the news. Market leader Riot Platforms (RIOT)'s stock price jumped 10 percent. Shares of Iris Energy, Hive Blockchain, Cleanspark, Hut 8 Mining, and Marathon Digital Holdings also rose 5% or more.

Riot Platforms, one of the world's largest publicly traded Bitcoin mining companies, has openly criticized the proposed tax. In a commentary for Blockworks, its spokesman wrote that the U.S. should lead the world in Bitcoin infrastructure development.

"It's hard to overstate how bad an idea this is," Riot's commentary on the proposed tax said. - It would cause financial innovation and jobs to flow away from America to foreign jurisdictions, increasing U.S. national security risks."

According to Ogienco, "The U.S. is strengthening the dollar with crypto mining." This industry, according to the BitRiver representative, will become strategic for the U.S. in order to maintain its leadership position in the digital economy and attract high-tech investments on the world stage. It is likely that the proposed restrictions and increases in taxation rates for miners will not be accepted and introduced, the expert said.

"The largest institutional investors in the U.S. (e.g., BlackRock) are already investing substantial funds in digital assets, considering this area promising. In this regard, U.S. regulators generally understand the importance of the development of the mining industry in the U.S. and seek to provide the most favorable conditions for it," Ogienko comments.

The industrial mining industry in the U.S. has apparently received a new impetus for development. According to BitRiver estimates, on the horizon of three years investments in new data centers in the U.S. with a combined capacity of 5 GW can reach $12 billion. At the moment, the capitalization of the market of industrial mining in the U.S. to $10 billion and has great potential for growth. However, these figures may be exceeded in Russia, and industrial mining may become a driver for the development of the digital economy and increase the welfare of the population, subject to reasonable regulation, the expert believes.

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