President Biden Proposes 30% Tax on Cryptocurrency Mining Electricity Consumption in FY 2025 Budget

In a significant move that could reshape the landscape of cryptocurrency mining in the United States, President Joe Biden has included a proposal in his Fiscal Year 2025 budget to impose a 30% tax on the electricity consumption of crypto mining operations.
The proposal, part of the “Fiscal Year 2025 Revenue Proposals,” seeks to broaden the tax base to encompass digital assets, which are currently only subject to broker and cash transaction reporting guidelines. Under the plan, firms engaged in digital asset mining, whether they own or lease computing resources, will be subject to an excise tax based on their electricity consumption.
Crypto mining companies will be required to meticulously document the quantity and type of electricity consumed, with a specific focus on purchased electricity from external sources. Moreover, entities leasing computational capacity must report the electricity value provided by their lessors, which will be utilized to calculate the tax base.
The implementation of this tax will be gradual, starting at 10% in the first year, increasing to 20% in the second year, and ultimately stabilizing at 30% from the third year onwards. This phased approach extends to companies generating their own electricity or utilizing off-grid power, who will also face a 30% tax on the estimated costs of their electricity consumption.
President Biden’s proposal has sparked a contentious debate within the crypto community and beyond. Critics, including Pierre Rochard of Riot Platforms, argue that the tax could hinder Bitcoin’s growth and pave the way for the introduction of a Central Bank Digital Currency (CBDC). Concerns have also been raised about the potential impact on miners utilizing renewable energy sources.
U.S. Senator Cynthia Lummis has publicly opposed the tax, expressing concerns about its potential to stifle the development of the cryptocurrency industry in the United States. While acknowledging the government’s recognition of cryptocurrency in the budget as a positive step, Lummis believes the proposed tax rate could pose significant challenges.
The tax proposal is part of President Biden’s broader agenda to regulate and generate revenue from the digital asset market. Other measures included in the budget aim to enforce wash trading rules and enhance reporting requirements, projected to generate over $42 billion for the national treasury over the next decade.
Despite its revenue potential, the proposal faces opposition from Congressional Republicans, who criticize the budget’s focus on increased spending. Speaker of the House Mike Johnson and other Republican leaders have denounced the budget as a continuation of “reckless spending,” warning of potential consequences for America’s financial stability.
The discussion surrounding President Biden’s budget proposal occurs amidst heightened political activity following Super Tuesday and the recent State of the Union Address. As fiscal policy considerations intersect with political debate and regulatory developments in the digital currency space, the proposed tax on cryptocurrency mining electricity consumption emerges as a pivotal issue with far-reaching implications.