Report: Energy Tax Targeting Crypto Industry – Bad Idea for a New Year

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A new Competitive Enterprise Institute report investigates whether the energy usage of certain cryptocurrencies like Bitcoin merits a targeted electricity tax on the industry proposed by the Biden administration.

Cryptocurrency mining is a verification process that expends energy and is utilized by Bitcoin and some other cryptocurrencies to support their decentralized, peer-to-peer business models.

The report concludes that an electricity tax penalizing crypto companies would do more harm than good, would stifle innovation and consumer wellbeing, and wouldn’t even make sense given the rapid pace of change in the industry.

“President Biden’s proposed 30 percent tax on the cost of electricity used in crypto mining amounts to a back-door carbon tax, imposed on a specific industry and focused on electricity use rather than emissions,” explained James Broughel, co-author of the report along with John Berlau and Ari Patinkin. “It may be that the attack on crypto companies is just the beginning of a larger government agenda to punish electricity use.”

“The innovation and dynamism from emerging market sectors such as crypto is vital to ensuring not just rising living standards but improved conservation efforts as well,” said Berlau.

The report makes several key arguments against a crypto energy tax:

  • Energy used for crypto mining is put to good use, not wasted. It helps create a new, potentially more secure financial ecosystem, increases financial inclusion, and enhances transaction privacy.
  • The energy footprint of the crypto industry is not disproportionately large compared to other industries, like the gold and copper mining industries or even the traditional payments systems, like bank data centers and bank branches.
  • Crypto mining uses a lot of energy now but also promotes conservation and innovation by utilizing diverse energy sources in new ways.
  • An electricity tax targeted at crypto sets a terrible precedent by singling out one industry for a punitive tax. Why would energy tax proponents stop there?

Rather than make the public and industry feel guilty about energy use, the report recommends policy makers find ways to remove government-imposed obstacles that make it difficult to generate electricity.