The deal between President Biden and senior Republicans to prevent the US from defaulting on its debt will affect the White House’s plan to impose stiff taxes on cryptocurrency mining. If passed, the debt deal would block a tax rule that called for a 30% tax on the electricity Bitcoin and other crypto miners use.
Crypto Mining Tax Excluded by Debt Deal
President Joe Biden and Republican lawmakers have agreed to raise the US debt ceiling and avert a default. On Monday, Republican congressman Warren Davidson shared a link to the “Fiscal Responsibility Act of 2023,” a draft bill allowing the US to raise the country’s debt ceiling.
The bill does not mention the proposed crypto mining tax bill, as noted by Pierre Rochard, vice president of research at Bitcoin mining firm Riot Platforms, who asked for confirmation that the energy excise tax had been ditched. “One of the victories is blocking proposed taxes,” Davidson responded.
The White House introduced the Digital Assets Mining Energy excise act, also known as the DAME Act, in early May, which proposed a tax on the electricity used in bitcoin and other crypto mining. The initial bill suggested a 10% tax beginning in 2024, increasing to 30% by 2026.
According to the Biden administration, the proposed tax bill was intended to target cryptocurrency miners due to the negative impact their activities have on the environment. The White House said miners’ impact is high even when using clean energy as their electricity consumption “reduces the amount of clean power available for other uses, raising prices and increasing overall reliance on dirtier sources of electricity.”
Additionally, the statement claimed that cryptocurrency mining does not have the same benefits as other businesses that consume similar energy rates. The White House dismissed the concern of digital assets operations moving abroad by noting that other major economies, such as China, have also imposed restrictions on the industry.
The text said that the act would represent a key part of the administration’s effort to curb the damage caused by climate change and tackle increasing energy prices affecting Americans. The White House estimated the DAME Act would raise around $3.5 billion in revenue over a decade.
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US Debt Deal Goes to Congres Amid Impending June 5 Default
Despite the efforts of Biden and McCarthy to promote the bill, they must still address the doubts of both Democrats and Republicans in Congress, who remain divided on the issue. The bill must be approved by Congress ahead of the Treasury’s projected June 5 default.
To pass in the House, the bill requires at least 218 votes, with at least 111 Republicans and 107 Democrats supporting it, according to the Washington Post. McCarthy’s allies have reportedly said that the majority of Republicans are in favor of the bill.
A US debt default would be bad for the global economic system because the US is the world’s largest economy and a major player in international trade and finance. A default would undermine confidence in the US financial system and the global market, leading to higher borrowing costs and potential market disruptions.
Furthermore, a default could lead to a downgrade of the US credit rating, making borrowing more expensive for the government and US corporations. Higher borrowing costs in the US could also lead to global economic turmoil. US Treasury bonds are considered a safe-haven investment for many investors and are widely used as a benchmark for other investment products.
A default would also significantly affect countries and companies heavily invested in the US, such as China, Japan, and Europe. It could also adversely affect emerging markets and increase volatility in financial markets, ultimately leading to a delay in economic recovery worldwide.
Meanwhile, Treasuries and US stock futures have increased in hopes that Congress will pass the debt deal. On Monday, Dow futures and Nasdaq futures rose around 0.35%, with S&P 500 futures up 0.3%.
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About the author
Ruholamin Haqshanas is an accomplished crypto and finance journalist with over two years of experience writing in the field. He has a solid grasp of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi), and the emerging market for non-fungible tokens (NFTs). He is an active user of digital assets for remittances.
