- Bitcoin faces more headwinds as the US government prepares for another attack.
- The tax is said to be designed to encourage mining companies to pay for the environmental impact of mining
The US government has shown more aggressiveness against Bitcoin [BTC] and altcoins in recent weeks. It’s now about to kick things up a notch when a recently introduced bill passes and this time Uncle Sam goes for the underlying tech.
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A recent Whitehouse publication on the US president’s fiscal year 2024 budget revealed that the government was eyeing crypto mining. The budget contains a new proposal called the Digital Asset Mining Energy (DAME) Excise.
The latter will reportedly levy a 30% tax on crypto mining companies as an environmental cost for the electricity used in crypto mining operations.
The government is attacking proof of work #bitcoin mining. https://t.co/tyQE8i8y5h solves this. https://t.co/1yo1U4JjTe
— Richard Hart (@RichardHeartWin) May 3, 2023
The publication suggested that the tax was designed to encourage mining companies to pay for the environmental impact of their mining operations. However, such a high load may actually be aimed at harming the Bitcoin proof of work mining system, and possibly to restrain it.
This is because such a high tax could force most mining companies in the US out of business or push them to other jurisdictions.
Assessment of the potential impact on Bitcoin miners and hash rate
The latest Bitcoin mining data in 2023 showed that the US accounts for about 34.5% of Bitcoin’s hash rate. This means that most Bitcoin miners are currently located in the US, and most of that hash rate is contributed by companies specifically focused on crypto mining.
The DAME excise will reportedly target institutions engaged in crypto mining. This means that Bitcoin’s hash rate could drop significantly if the new tax corners such companies and forces them to shut down their operations.
Alternatively, many of them could be forced to move their operations outside the US. Individuals conducting mining operations from home are unlikely to be affected.
How much are 1,10,100 BTC worth today
Bitcoin’s hash rate is likely strong enough to withstand a significant drop in hash rate. This is because miners in other jurisdictions would pick up the slack. Miners’ earnings probably wouldn’t be affected that much, but the high tax would likely hurt mining profitability.
Source: Glassnode
The impact would also depend on the attractiveness of crypto mining. A recent surge in Bitcoin ordinal inscriptions has fueled an increase in network activity.
This then led to more miner revenue and encouraged more miner participation, driving up the hash rate. In other words, Bitcoin’s hash rate will self-balance, just like it did when China banned Bitcoin mining.
