The US government aims to impose a tax on bitcoin in order to mitigate its environmental consequences

Computers used to secure cryptocurrencies such as bitcoin consume significant amounts of power, leading to increased electricity prices and potentially contributing to climate change. Now, the US government is determined to address the issue
Experts caution that the US government’s proposal to tax cryptocurrency miners, aimed at curbing the industry’s significant environmental impact, may only relocate the issue instead of solving it.

Cryptocurrencies like bitcoin are secured through a process known as mining, which requires significant computational power and consumes a substantial amount of electricity. According to recent data from the University of Cambridge, bitcoin alone is responsible for 0.69 percent of global electricity consumption.

According to estimates by the US government, a significant portion of the nation’s electricity consumption in 2023 can be attributed to a small number of mining operations. Additionally, there has been a direct correlation between a 5% increase in electricity costs in Texas and the heightened demand from miners. President Joe Biden’s proposed budget for the fiscal year 2025 highlights the adverse environmental impact of cryptocurrency mining. It emphasizes the potential environmental justice implications and the possibility of increased energy prices for those connected to the same electricity grid as digital asset miners.

The budget includes a proposed tax of 30% on the total energy costs of miners, which would be applicable to both power from the grid and any electricity generated by the miners themselves. The implementation would occur in stages, beginning with a 10 percent charge in 2025, followed by a 20 percent charge in 2026, and ultimately culminating in a 30 percent charge in 2027. A similar tax was proposed by Biden last year, but it did not succeed in passing the House of Representatives and Senate to become law—challenges that this second attempt now encounters.

The decision, coinciding with bitcoin’s remarkable surge to a record-breaking £56,000 in recent weeks, has sparked intense backlash from the cryptocurrency industry. Dennis Porter from the Satoshi Action Fund expressed strong opposition to what he referred to as a “back door ban” on mining. He vowed to vigorously fight against this perceived act of targeted discrimination.

I reached out to multiple prominent bitcoin mining companies to gather their input regarding the proposed tax. Block Mining, Frontier Mining, and HIVE Digital Technologies did not provide a response, while TeraWulf chose not to comment.
According to Alex de Vries at VU Amsterdam in the Netherlands, taxing the industry may lead to unintended consequences. Following China’s ban on bitcoin mining in 2021, companies have relocated their operations to countries such as Kazakhstan. In this nation, over 90 percent of the electricity supply is generated from fossil fuels, including coal.
“It is unlikely that it would provide a definitive solution,” de Vries comments, highlighting the highly adaptable nature of mining operations. These operations have the ability to relocate to different countries in search of more favorable regulatory conditions or lower energy costs. “Climate change is a worldwide issue, and when emissions are shifted from one country to another, it only worsens the global problem by degrading the power source.”

“Ideally, addressing this on a global scale would be the most effective approach,” suggests de Vries. “Reducing the emissions of these miners is a priority.” De Vries has been a strong proponent of bitcoin adopting the same approach as Ethereum, a cryptocurrency that revolutionized its operations by eliminating mining and drastically reducing its power consumption by 99.99 percent. However, he mentions that the majority of bitcoin developers have displayed little enthusiasm for change.