The US government is taking a more aggressive stance against cryptocurrencies, and it’s targeting the very foundation of Bitcoin: mining. A recently proposed Digital Asset Mining Energy (DAME) Excise tax could lead to a dramatic decline in the country’s Bitcoin mining operations.
The President’s budget for the fiscal year 2024 revealed the government’s intention to focus on crypto mining with the DAME tax. This new proposal could impose a hefty 30% tax on crypto mining companies as an environmental cost for the electricity they consume during their operations.
While the tax aims to make mining companies accountable for their environmental impact, some believe the real objective is to weaken Bitcoin’s proof-of-work mining system. If passed, the high tax rate may force many US-based mining companies to shut down or move their operations elsewhere.
Currently, the US contributes about 34.5% of Bitcoin’s global hash rate, a significant portion of the overall mining power. If the DAME tax becomes law, it could lead to a substantial drop in the hash rate, with mining companies either ceasing operations or relocating outside the US. Home-based miners, however, are unlikely to be affected.
Although Bitcoin’s hash rate may be resilient enough to withstand a major decline, the tax could still impact mining profitability. Fortunately, the network has a history of balancing itself, as seen when China banned Bitcoin mining, so the overall impact on miner revenue may be limited.
Ultimately, the fate of Bitcoin mining in the US will depend on the attractiveness of crypto mining and the government’s willingness to pass the DAME tax. As the crypto landscape continues to evolve, miners and investors alike should stay informed about potential changes that could affect the industry.