Crypto market participants are rejoicing as the 30% tax on digital asset mining (DAME) seems to have been omitted from the US debt ceiling deal. In this text, we will explore the nature of this tax and its potential influence on Bitcoin and other crypto assets.
What is the core of this tax?
At the beginning of May, Joe Biden’s administration put forth a proposal to make the crypto mining tax a part of negotiations for a new debt ceiling. The idea was simple: impose a tax on energy utilized in mining digital currencies. The new regulations were anticipated to take effect in 2024, starting with a 10% tax rate, which would subsequently increase by 10% each year until reaching 30% in the end.
It is important to note that the tax would have applied to both proof-of-work and proof-of-stake networks, despite the difference in energy consumption. As a result, it might have affected not only BTCUSD but also ETHUSD and other coins (however, Bitcoin miners, due to their higher energy consumption, would have likely paid much higher taxes).
What are the pros and cons of DAME?
There are two main advantages attributed to this measure: ecology and fresh funds for the US budget. The tax was supposed to mitigate negative impact on the environment while generating $3.5 bln for the budget over the next decade.
But the proposal faced criticism from many government and crypto industry representatives. They claimed that the United States with its own hands was depriving itself a chance to lead in one of the most innovative sectors of the economy. Miners could simply relocate their operations to other countries, resulting in the potential loss of businesses, investments, and job opportunities.
What consequences did we face?
Yes, even if something doesn’t happen, it may have its consequences. The news immediately appeared on the Bitcoin chart, causing the cryptocurrency to experience a sharp increase and reach its highest point in three weeks (although this surge would not last).
However, the short-term effects portrayed on the price chart are just one aspect. In a broad sense, the failure to pass the tax could support crypto and become a green light for the industry’s further development in the United States. Also, crypto miners have recently received positive signals from several states, such as Arkansas, Texas, and Montana, which proposed legal protection for digital asset mining firms.
The firms themselves experienced a boost in the stock market following the news of the exclusion of the new tax. Riot Platforms, Marathon Digital Holdings, Iris Energy and other participants in the industry saw their stocks rise by 8-10%. There you have it – sometimes it’s possible to yield profits in the stock market thanks to crypto.
Is it the end?
To be honest, now one really knows. Crypto community celebrated this victory, but in fact, the proposal was only excluded from the current debt ceiling deal. So, it might come back at any given moment (or not come back, who knows).
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