Biden's Bitcoin mining tax plans are misguided

By Nigel Green

As the US election draws nearer, policies between the candidates are increasingly being scrutinized. 

Last month, President Joe Biden put forward a variety of crypto related taxes and regulations which he says could generate almost $10 billion next year, and over $42 billion over the next decade, according to his proposed 2025 budget. 

Among the proposals are an excise tax on Bitcoin mining – something I feel places him on the wrong side of history. 

The plan to tax Bitcoin mining misses the mark entirely and could stifle innovation and economic growth in the long run.

First and foremost, let’s address the elephant in the room: Bitcoin mining is not the environmental bogeyman it’s made out to be. 

While it's true that Bitcoin mining consumes energy, it’s essential to understand the broader context. The Bitcoin network is one of the most secure and decentralized systems in existence, and this security comes at a cost. However, it’s a cost that pales in comparison to the environmental footprint of traditional banking and finance.

According to a study by the University of Cambridge, the traditional banking system consumes an estimated 263.72 TWh per year. In contrast, Bitcoin mining consumes around 95.68 TWh per year. 

When you consider the immense benefits that Bitcoin provides, such as financial inclusion for the unbanked and underbanked, censorship resistance, and a hedge against inflation, the energy consumption becomes a small price to pay.

In addition, the proposed excise tax on Bitcoin mining is not only shortsighted but also punitive. 

By imposing a tax equal to 30% of the electricity costs, the Biden administration is effectively handicapping an industry that has the potential to drive economic growth and innovation for decades to come. 

Instead of nurturing this burgeoning industry, they’re stifling it with unnecessary red tape and burdensome taxes.

Let’s break down the proposed tax structure. 

Starting at 10% in the first year and ramping up to 30% by the third year, this tax would place an undue burden on miners, many of whom operate on thin profit margins. In an industry where every percentage point counts, such a tax could push smaller miners out of business altogether, consolidating power in the hands of a few large players.

Plus, this tax would likely drive mining operations out of the United States and into jurisdictions with more favourable regulatory environments. 

This would not only cost the US jobs and tax revenue but also undermine its position as a leader in technological innovation. Rather than embracing this growing sector, the Biden administration is pushing it away, potentially ceding ground to countries like China, which already dominates the mining industry.

But perhaps the most egregious aspect of Biden's proposal is its targeting of “wealthy crypto investors.” 

By closing supposed loopholes that benefit these investors, the administration is sending a clear message: cryptocurrencies are a threat to the status quo. Instead of embracing innovation and disruption, they’re clinging to outdated notions of wealth and power.

In reality, crypto has the potential to democratize finance and level the playing field for all investors. By eliminating intermediaries and barriers to entry, they empower individuals to take control of their financial futures. Yet, the Biden administration seems intent on protecting the interests of the wealthy elite at the expense of the broader population.

If the United States wants to remain competitive in the digital age, it must embrace cryptocurrencies and an environment that encourages innovation and growth. Otherwise, it risks being left behind as other countries seize the opportunities that this new technology presents.

President Biden’s proposed crypto tax is a misguided attempt to rein in an industry that should be celebrated, not vilified. 

These plans are unlikely to be a vote winner – especially among younger voters who he is relying upon – and they make him look backward looking, and, dare I say it… old, which is a perception he is actively having to fight every day.

Author Bio

Nigel Green is deVere Group CEO and Founder