Proposed Tax on Bitcoin Mining Is Bad Business – Indianapolis Business Journal

Remember all the talk about banning gas stoves in December? Forbes summed it up best with its article headlined, “Yes, cooks, the government is coming for your gas ovens.”

Consumers and politicians from both sides of the aisle pushed back, saying that “This is a recipe for disaster. The federal government has no business telling American families how to prepare their dinner” and “It’s about telling the American people that the federal government knows best.”

The good news is that the commission chair backed off and our gas furnaces appear to be safe for now. The bad news is that the government appears to be back with another violation of economic freedom: a proposed 30% additional tax on electricity used for Bitcoin mining.

Innovation vs. taxation

For those unfamiliar, Bitcoin mining is the process of validating transactions on the Bitcoin network by solving complex mathematical equations. In return for this work, miners are rewarded with a certain number of Bitcoins. The power consumption for this process is no joke, which is why the proposed 30% tax would effectively force all American companies overseas.

Bitcoin and the Bitcoin mining industry will continue to grow regardless of US policy, with only countries like Paraguay and Russia taking our place as market leaders. Imagine if a similar tax was levied on tech startups in the 1990s because computers used too much power. The Internet would still have won, but Silicon Valley might have ended up in Moscow instead of San Francisco.

Reconstruction of rural communities

While Bitcoin mining uses a lot of power, energy consumption doesn’t tell the whole story. Bitcoin miners are encouraged to find cost-effective energy sources, which means that setting up shop in a big city would be impractical due to competition with office buildings and millions of residents. As a result, many miners choose to invest and operate in rural areas, where once prosperous industries have since declined, leaving behind excess energy resources.

In fact, some states have already recognized the economic benefits of Bitcoin mining and have passed so-called “right to mine” bills to protect mining operations from discriminatory electricity rates. In recent months, Missouri, Montana and Mississippi have all passed these bills with bipartisan support. Indiana, which prides itself on being a business-friendly state, should follow suit.

Leading the transition to sustainable energy

In addition, many mining companies already derive most of their energy from renewable sources and are actively accelerating the transition to sustainable energy by serving as first-line buyers for new projects. At my company, Megawatt, we specifically chose our mine site because it was near a wind farm and used more than 85% carbon-free energy.

While not all mining companies may be equally committed to sustainability, the fact remains that Bitcoin mining is more sustainable than many people realize. According to a report by the Bitcoin Mining Council, the global Bitcoin mining industry used 58.8% renewable energy as of Q4 2022. This compares to the United States, which derives only 31.3% of its power from renewable sources and the global average of 21.7 %.

Mining keeps the lights on

Also, Bitcoin miners can help monetize stranded or wasted energy and spur more renewable projects. Developers can invest in larger projects, knowing that Bitcoin miners can serve as buyers of first resort if there is no immediate demand for the electricity they produce, allowing them to get a faster return on investment and build more renewable projects. This example is particularly relevant in Indiana because we are currently in the process of building America’s largest solar farm – a $1.5 billion project being built over several phases.

The government’s proposal also claims that Bitcoin mining “creates uncertainty and risk for local utilities and communities.” This could not be further from the truth. In reality, Bitcoin miners help fund new tool improvements and help balance the grid with their flexible load. By turning off their machines during periods of high demand, miners help prevent blackouts, ensuring communities have power when they need it most.

Indiana’s “Right to Mine”

This proposed tax on electricity will end Bitcoin mining innovation in America. But more than that, it sets a dangerous precedent for what other electricity-centric goods the government can tax. What will be next? A tax on electric tumble dryers? After all, we can dry our clothes on a rack. Or perhaps a tax on Christmas lights? They use about the same amount of electricity globally as Bitcoin mining.

Consumers must be able to make their own decisions about how they use the electricity they pay for, without interference from the authorities. I will personally work to pass a “right to mine” bill in Indiana to ensure that innovative businesses can grow with confidence in our state. Governor Eric Holcomb has been quoted as saying, “Indiana’s business-friendly climate along with our strong Hoosier work ethic make our state prime for entrepreneurial growth and innovation.” Let’s hope that continues to be the case.•

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Rekhter is co-founder and CEO of Megawatt.