The Biden administration has recently proposed a new tax on cryptocurrency miners and the elimination of tax-deductible losses related to wash-trading of crypto tokens.
This comes as the government seeks to address concerns over the environmental impact of digital asset mining and close tax loopholes associated with crypto trading.
Under the proposed plan, any company using computing resources to mine digital assets will be subject to a 30% tax on the cost of electricity used.
This tax is expected to be introduced gradually over three years, with 10% annual stages starting from Dec. 31, 2023. The Treasury Department cited the negative environmental effects and energy price increases associated with the growth of digital asset mining as the reason for this tax.
According to the White House, the estimated global electricity usage for crypto assets is between 120 and 240 billion kilowatt-hours per year, which exceeds the annual electricity usage of Australia.
The proposed tax is aimed at reducing energy consumption and promoting more sustainable mining practices.
In addition to the mining tax, the Biden administration also plans to eliminate tax-deductible losses related to wash-trading of crypto tokens. This refers to investors selling a financial instrument for a loss to claim the deductible and then immediately buying it back.
Currently, crypto traders can claim tax-deductible losses on losses and then immediately repurchase tokens, unlike stocks and bond traders who are prohibited from repurchasing the same securities for 30 days.
The U.S. government expects to raise around US$24 billion from fixing this loophole by applying the same restrictions on crypto from Dec. 31, 2023.
The proposal is part of President Biden’s 2024 Fiscal Year budget and seeks to promote fair and transparent tax practices in the cryptocurrency market.
