Definition
The Digital Asset Mining Energy tax, introduced during the 2023 budget cycle, sought to impose an excise levy on electricity consumed by cryptocurrency miners. The measure never reached enactment.
In March 2023 the Biden administration released the Treasury Greenbook. The document proposed a phased in excise tax of thirty percent on the cost of electricity used to validate distributed ledger transactions. Officials estimated that proof-of-work networks then drew roughly 2.3 percent of total domestic power generation.
The administration framed the tax as a corrective for externalized environmental costs and as a step toward parity between digital asset producers and traditional extractive industries. A thirty percent surcharge on power would have compressed gross margins for miners. Hash-rate distribution data from 2023 show that ten percent of network participants controlled ninety percent of total computational capacity. Congressional negotiators deleted the provision during debt ceiling talks in May 2023.
Had the statute taken effect, every domestic mining entity would have filed quarterly returns listing kilowatt hours consumed, fuel type along with power-purchase agreements. Colocation providers would have reported the electricity attributable to hosted clients.
Ethereum, the second largest protocol by market capitalization, abandoned proof-of-work in September 2022. The network now relies on proof-of-stake consensus – eliminating direct electricity consumption for block production.
The Treasury’s 2024 revenue proposals restated the earlier language verbatim: âAny firm using computational resources, owned or leased, to mine digital assets shall remit an excise tax equal to thirty percent of the cost of electricity used in the mining process.â
Fast Fact
Riot Platforms produced 639 bitcoin during April 2023 at its Rockdale, Texas, facility. The site houses 95,400 application specific integrated circuit miners. Each unit retails for approximately nine thousand dollars – the company also pays for land, buildings – cooling systems, and maintenance staff.
Riot filed a first quarter 2023 net loss of fifty five million dollars on seventy three million dollars in revenue. During a heat wave in September 2023 the company curtailed operations – surrendering an estimated nine million dollars in power sale credits to preserve grid stability.
Important
Proof-of-work mining relies on a distributed ledger that records transactions in sequential blocks. Each block contains a cryptographic hash of the previous block – forming an immutable chain.
A thirty percent electricity tax would have narrowed profit margins for domestic miners. Many operators would have relocated to Kazakhstan, Russia, or other jurisdictions with subsidized power.
Geographic relocation does not reduce aggregate energy demand or carbon emissions – it merely shifts the physical footprint of the activity.
A single S19-class miner draws 3,250 watts continuously. Ninety-four thousand such machines operating in parallel consume 7.332 gigawatt hours per day. At a blended commercial rate of ten cents per kilowatt hour, the daily electricity bill equals 733,200 dollars. A thirty percent excise would add 219,960 dollars in daily tax liability.
The Energy Information Administration assigns 0.855 pounds of carbon dioxide per kilowatt hour for the average U.S. grid mix. The 94,000-machine farm would emit 6.27 million pounds of carbon dioxide per day.
Do Crypto Miners Pay Taxes?
Miners owe federal income tax on the fair market value of coins at the moment of receipt. Self-employment tax applies when the activity rises to the level of a trade or business.
Are Cryptocurrency Profits Taxed?
Coins received from mining are taxed as ordinary income. Subsequent appreciation or depreciation after the date of receipt is treated as capital gain or loss upon disposal.
What Is Digital Asset Mining?
Digital asset mining is the process by which specialized computers compete to solve a cryptographic puzzle. The first machine to find a valid hash earns the right to append a new block to the blockchain and receives a protocol defined reward.