The US Department of Treasury has yet again landed a blow on the crypto sector by proposing an increase in tax rates on power consumption from the firms’ mining activities. The department has proposed a 30% tax on electricity costs, specifically targeting crypto mining firms. This comes a mid a new budget proposal that is targeting the sector to reduce mining activity. According to reports from the treasury, this taxes will subject firms using mining rigs, owned or rented, to a 30% exercise tax on the cost of its electricity consumption. The Treasury has proposed a gradual rollout of the tax scheme with a 10% tax rate in the next financial year followed by another 10% yearly increase in the ensuing years to reach its target of 30% by 2026. This proposal targets all forms of electricity including those miners who use of-grid electricity in their operations. The department is further amending its law to ensure mining firms report the form of power they use and its value in its effort to ensure all mining activity is subjected to the tax.
The US Department of Treasury has given its own reasons why the current administration is hell bent on reducing crypto mining activity. The administration wants to reduce environmental effects and other harms associated with mining activities. It has also cited the uncertainty and risk that the operations pose to residential communities and locations housing the mining rigs in addition to the increased energy costs for electricity users sharing a grid with the crypto miners. The government, through a report, states that the recent increase in crypto mining activity has increased energy consumption. It is therefore forcing the sector to scale down its operations to reduce its carbon footprint.
This proposal however, has not settled well with some in the crypto community who claim the tax structure is bugged and absurd. Some claim that for an administration that cares so much about climate, the proposal should tax the miners’ carbon footprint and not its total energy consumption. This proposal comes as some law makers are planning to table a bill in congress, The Environmental Transparency Act, to legislate the crypto sector. The act is aimed at creating transparency around crypto mining operations while laying bare its environmental effects. If this act comes to life, crypto mining firms will be obligated to divulge data on emissions for any operations consuming over 5 megawatts of power. The act also provides for authorities in the environment sector to set up an inquiry into the environmental impacts of crypto mining and table a report within the next 18 months. The inquiry is set to receive a funding of $5 million from the government as its budget if the act passes congress.
Author’s Sentiments
It is important to note that crypto mining is a very expensive affair. It requires top of the line rigs and also consumes a lot of power to run its equations. Maintaining the setup is also a daunting task that bleeds resources from the mining firms. With all these factors in consideration, addition of more taxes to the sector will reduce the profit margin for investors and cause them to scale down their operations all completely abandon their activities. Either way, the crypto community will suffer a great blow. Climate activism into the tech sector is relatively new. Recently, a news agency in the UK released a documentary on the impact of large server farms in local communities in the UK. The documentary shows that such server farms draw a lot of water from local sources to cool down the servers and as well consume tones of electricity that might blow out grids that can not meet their power requirements. Whether this activism leads to more taxes and legislation in the sector leaves a lot to be desired. What do you think? Make your opinion known below.
