- President Joe Biden has proposed an excise tax on cryptocurrency mining companies that is 30% of the cost of the power they use.
- Biden’s Fiscal Year 2024 budget included a proposal to implement wash sale rules for crypto assets in order to close tax loopholes.
The administration of U.S. President Joe Biden has proposed an excise tax on cryptocurrency mining companies that is 30% of the cost of the power they use, as well as eliminating tax-deductible losses associated with crypto token wash-trading, according to a U.S. Department of the Treasury’s document published on 9 March.
According to the Treasury Department, any company that uses computing resources, whether owned or borrowed, to mine digital assets will be subject to the 30% tax, which is expected to be implemented over three years in 10% annual stages, beginning 31 December this year.
The increase in energy consumption caused by the growth of digital asset mining has negative environmental consequences and may have implications for environmental justice, as well as raising energy prices for those that share an electricity grid.
According to the White House, the estimated worldwide power usage for crypto assets is 120-240 billion kilowatt-hours per year— a fact that exceeds the annual electricity usage of Australia.
Addressing tax loopholes
Furthermore, President Joe Biden’s Fiscal Year 2024 budget included a proposal to implement wash sale rules for crypto assets in order to close tax loopholes.
Wash trading is the practice of selling a financial instrument for a loss in order to claim the deductible and then immediately buying it back.
Since crypto assets are not classified as securities, crypto traders can claim tax-deductible losses on losses and immediately repurchase tokens. On the other hand, stock and bond traders are prohibited from repurchasing the same securities for 30 days.
The Treasury claimed that the power consumption of crypto mining operations not only has adverse environmental impacts but it increases prices for those sharing a grid with the operations and creates uncertainty and risks to local utilities and communities.
The United States expects to impose the restrictions on cryptocurrency beginning 31 December 2023, with the country potentially earning around $24 billion from closing the lacunae, according to the White House.