Meanwhile, even crypto-mining-friendly Texas is exploring ways to limit such operations’ heavy use of the Lone Star State’s power grid.
Texas is known for many things. Now, two of them, cryptocurrency mining and hot summers, are colliding.
The Lone Star State has become a major hub for bitcoin miners. Many operations set up shop here because of the state has vast spaces needed for the operations.
Then there’s Texas’ mostly independent power grid, which has few connections to the rest of the country. This has allowed Texas to avoid federal oversight.
And don’t forget Texas’ demand response programs, under which companies get paid in credits to turn off their operations when the power grid sees a surge of demand.
Grid failure poses crypto concerns: Now, however, Texans are taking a closer, and less-welcoming, look at cryptomining.
The initial catalyst was the statewide winter power grid failure in February 2021. Now there is growing concern about whether the grid could handle unexpectedly hot summer temperatures, not to mention increasingly less predictable weather year-round.
The Texas legislature has explored legislation to cap how much miners can participate in the state’s grid balancing programs, as well as eliminate state tax abatements for certain properties. The measure has cleared the senate, but it looks like time to enact these crypto energy limits will run out this legislative session.
Federal tax proposed, too: Texans’ second thoughts about cryptomining is just one area of concern for the digital currency sector.
Crypto miners also are facing a potential new federal tax.
This month, the White House started talking up President Joe Biden’s budget proposal to tax the process of mining crypto assets. The cryptomining tax would phase-in an eventual federal tax equal to 30 percent of the cost of the electricity the miners use.
The Biden Administration’s focus on digital currency mining is related to its overall efforts to reduce the physical and economic costs to the environment.
Massive power suck: In Texas alone, the West Texas site of a U.S. Bitcoin Corp. mining operation consumed 173,000 megawatt hours (MWh) of power in one month. The average American home uses about 10 MWh in a year, according to the Energy Information Administration.
About 60 percent of that month’s bitcoin mining power was provided by the Texas grid, with most of the remainder from a nearby wind farm.
The White House argues that cryptomining firms that consume massive amounts of power currently do not have to pay for the full cost they impose on others, including higher energy prices, local environmental pollution, and the impacts of increased greenhouse gas emissions on the climate. The proposed Digital Asset Mining Energy (DAME) excise tax would change that.
Crypto tax yeas and nays: This national argument, like the legislation in Texas, is just getting started. That’s why this weekend’s Saturday Shout Out goes to articles looking at the DAME excise tax.
Let’s start at the source, the Biden Administration. The argument for the tax is detailed in the White House Council of Economic Advisers’ piece The DAME Tax: Making Cryptominers Pay for Costs They Impose on Others.
Next is Greenpeace’s article in support of President Biden’s Proposed Crypto-Mining tax: a Step in the Right Direction.
Gizmodo notes that crypto miners have become a drain on global resources in Biden Wants to Hit Power-Hungry Crypto Miners With a Big Tax Bill.
Investopedia asks Biden Wants 30% Crypto Mining Tax, But Can It Work?
Publications that cater to the crypto crowd offer more skeptical takes on the DAME tax.
Will Biden’s plan to tax crypto mining reduce emissions? Critics say no, according to an article in CoinTelegraph.
Bitcoin Magazine says DAME would harm businesses and push innovation out of the United States in its article Biden Administration Proposes 30% Tax on Energy Used by Bitcoin Miners.
CoinDesk says White House Pushes for Punitive Tax on Crypto Mining.
And Biden’s bold move: White House wants crypto miners to pay 30% climate change tax is how CryptoSlate characterizes the proposal. The article talks to opponents who call it a “war on crypto.”
Finally, because I’m a Texan and have personally experienced several power outages, winter and summer, I’m closing with an item from last year by the state’s comptroller on Cryptocurrency in Texas: Opportunities and Challenges in Mining Digital Coins.
As surprising as it sounds, the comptroller’s piece is pretty even-handed, with many of its general crypto and power use observations applicable to almost any location.
You also might find these items of interest:
- Don’t ignore the Form 1040 digital asset question
- Auditors group latest to call for more crypto oversight in wake of FTX fiasco
- IRS acknowledges crypto is currency in some places, but reiterates it’s not in U.S.
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