Crypto Miners Avoid 30% Energy Tax As Part Of US Debt Ceiling Deal

The Alpha:

• A recent bipartisan deal on the US debt ceiling could bypass several proposed tax increases, including the Digital Asset Mining Energy (DAME) tax that would have imposed a 30 percent tax on the energy consumption of crypto miners.
• Despite progress and President Joe Biden’s confidence, the deal still requires approval by the House of Representatives and the Senate.

Dive deeper

The cryptomining industry could face a serious setback this week as a tax proposal targeting energy consumption looks set to be shelved. The move comes after a bipartisan deal reached on the US debt ceiling that appears to defeat several proposed tax increases, including the controversial DAME tax.

The deal, which was struck between President Biden and senior Republican leadership, including House Speaker Kevin McCarthy, is aimed at averting a potential default on the US government’s debt. The potential legislation, called the Fiscal Responsibility 5 Act of 2023, is a 99-page bill that works to suspend the nation’s debt limit until 2025, thereby avoiding a federal default while placing limits on government spending.

May 28, Ohio Rep. Warren Davidson revealed on social media that the deal is likely to repeal the proposed 30 percent tax on energy used by cryptocurrency miners.

Yes, one of the victories is blocking proposed taxes.

— Warren Davidson 🇺🇸 (@WarrenDavidson) 29 May 2023

The tax, originally proposed as part of the DAME Act, had been a point of contention among major blockchain industry players and lawmakers. It proposed an initial 10 percent tax on the electricity used by Bitcoin and other crypto miners beginning in 2024, which would gradually rise to 30 percent by 2026, aiming to raise an estimated $3.5 billion in revenue over 10 years.

However, the proposed tax faced significant backlash from those inside and outside the crypto industry. Critics, including Democratic presidential candidate Robert F. Kennedy Jr. and Republican Senator Cynthia Lummisdisputed that the environmental argument was apparently a pretext to suppress a thriving industry and undermined both national and energy security.

While blockchain mechanics, especially in the case of proof-of-work systems like Bitcoin (and pre-merge Ethereum), are undeniably energy-intensive, advocates argue that the sector’s reliance on renewable energy largely offsets the environmental impact. Although some remain steadfast in their concerns about Ordinals Inscriptions, which have continued to draw users to BTC in hopes of partaking in the exponential growth of the Bitcoin NFT ecosystem.

What will be next?

Despite this promising development, the agreement on the debt ceiling is far from a completed agreement. It still faces rigorous scrutiny and debates in both the House of Representatives and the Senate before it can take effect.

Still, the current US administration appears confident in the deal. In a public statement, President Biden acknowledged the nature of the agreement as a compromise. “The agreement prevents the worst possible crisis: a default for the first time in our nation’s history,” he said.

All in all, those on the creative and technical side of Web3 will undoubtedly be watching the process of the deal closely, as the outcome will undoubtedly have far-reaching implications for the future of the US blockchain industry.

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Editor’s note: This article was written by an nft employee in collaboration with OpenAI’s GPT-4.