It’s official. President Joe Biden has proposed a 30% tax on crypto mining electricity usage. This is huge news for the crypto industry as a whole, and it could have major implications for miners and investors alike. So, what do you need to know about this new tax? Let’s break it down.
The tax would be phased-in at 10% per year over three years and covers electricity generated from both on and off-grid sources. A Department of the Treasury supplementary budget explainer paper released March 9 said any firm using resources — whether they be owned or rented — would be “subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.” It proposed the tax would be implemented after Dec. 31, phased in over three years at a rate of 10% a year, reaching the max 30% tax rate by the third year. Crypto miners would have reporting requirements on the "amount and type of electricity used as well as the value of that electricity."
This new tax could mean higher costs for miners, which could lead to less incentive to mine certain cryptocurrencies. The cost increase may also cause some miners to shut down operations due to their inability to turn a profit with their current setups or reduce their overall hashrate so that they can still turn a profit despite paying higher taxes on their energy bills. Additionally, some miners may look into alternative sources of energy such as solar or wind power in order to reduce their operating costs while still turning a profit after taxes are accounted for.
The implications of this new proposed tax are yet unclear, but one thing is for sure - it will certainly affect miners and investors in some way or another. It remains to be seen how this will play out, but it is something that should definitely not be ignored by anyone involved in cryptocurrency mining or investing. For now though, all we can do is wait and see how things shake out once this proposal becomes official law (if it does). Until then, stay informed so you know what changes might come your way when it comes time for you to pay up!