President Joe Biden has put forward a proposal for a 30% tax on the electricity consumption of cryptocurrency mining operations as part of his 2025 budget proposal. This move aims to address the current legal gap regarding the taxation of digital assets, signaling the government’s growing interest in the cryptocurrency sector.
A Closer Look at the Proposed Tax
The proposed tax, detailed in a document from the U.S. Department of the Treasury titled “General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals,” targets the electricity costs associated with mining digital assets. The administration suggests an excise tax—a type of tax applied to specific goods like fuel—on the energy used in crypto mining operations. According to the Treasury’s document, any company involved in mining digital assets, whether using owned or leased computing resources, would face a tax equal to 30% of their electricity expenses.
For the tax’s implementation, crypto mining entities would be required to report both the amount and type of electricity consumed, as well as the value of the electricity if purchased from external sources. Additionally, those leasing computational capacity must report the electricity value used by the leasing company, forming the basis for the tax calculation.
Phased Introduction and Scope
The government plans to roll out the tax gradually over three years, starting with 10% in the first year, escalating to 20% in the second year, and reaching the full 30% in the third year. This phased approach aims to provide a transition period for companies within the industry.
Notably, the tax would also apply to companies that generate their own electricity, including those utilizing renewable energy sources like solar or wind power. This aspect of the proposal underscores the broad scope of the tax, targeting all forms of energy consumption within the crypto mining sector.
Industry Reaction and Previous Attempts
The proposal has sparked debate within the cryptocurrency industry. U.S. Senator Cynthia Lummis expressed concern that such a tax could undermine the industry’s presence in the United States, despite acknowledging the government’s apparent bullish stance on cryptocurrency. Pierre Rochard from Riot Platforms suggested that the tax could be a strategy to suppress Bitcoin and pave the way for a central bank digital currency (CBDC).
This is not the administration’s first attempt to introduce a tax on electricity used by crypto miners. A similar proposal was included in the 2024 budget proposal made on March 9, 2023, highlighting the ongoing efforts to regulate and tax the cryptocurrency mining industry in line with broader economic and environmental goals.
