The Alpha:
- A recent bipartisan agreement on the U.S. debt ceiling may bypass several proposed tax increases, including the Digital Asset Mining Energy (DAME) tax that would have levied a 30 percent tax on energy consumption by crypto miners.
- Despite progress and President Joe Biden’s confidence, the agreement still requires approval from the House of Representatives and the Senate.
Dive deeper
The crypto mining industry might be facing a serious reprieve this week as a tax proposal targeting its energy consumption seems set to be shelved. The move comes following a bipartisan agreement reached on the U.S. debt ceiling that appears to defeat several proposed tax increases, including the contentious DAME excise tax.
The agreement, struck between President Biden and senior Republican leadership, including House Speaker Kevin McCarthy, aims to avert a potential default on the U.S. government’s debt. The prospective legislation, named the Fiscal Responsibility 5 Act of 2023, is a 99-page bill that functions to suspend the nation’s debt limit until 2025, thereby evading a federal default while placing limitations on government expenditure.
On May 28, Ohio Rep. Warren Davidson revealed on social media that the deal would likely nullify the proposed 30 percent tax on energy used by cryptocurrency miners.
Yes, one of the victories is blocking proposed taxes.
— Warren Davidson 🇺🇸 (@WarrenDavidson) May 29, 2023
The tax, which was initially suggested as part of the DAME Act, had been a contentious point among major blockchain industry players and lawmakers. It proposed an initial 10 percent tax on the electricity utilized by Bitcoin and other crypto miners starting in 2024, which would gradually rise to 30 percent by 2026, aiming to raise an estimated $3.5 billion in revenue over 10 years.
However, the proposed tax faced significant pushback from those within and outside the crypto industry. Critics, including Democratic presidential candidate Robert F. Kennedy Jr. and Republican Senator Cynthia Lummis, contested that the environmental argument was seemingly a pretext to suppress a thriving industry and undermined both national and energy security.
While blockchain mechanics, especially in the case of proof-of-work systems like Bitcoin (and pre-merge Ethereum), are undeniably energy-intensive, advocates argue that the sector largely relies on renewable energy, thereby offsetting the environmental impact. Although some remain steadfast in their concerns about Ordinals Inscriptions, which have continued to draw users to BTC in hopes of taking part in the exponential growth of the Bitcoin NFT ecosystem.
What’s next?
Despite this promising development, the debt ceiling agreement is far from a done deal. It still faces rigorous scrutiny and debates in both the House of Representatives and the Senate before it can take effect.
Yet, the current U.S. administration seems to be confident in the agreement. In a public statement, President Biden acknowledged the agreement’s nature as a compromise. “The agreement prevents the worst possible crisis: a default for the first time in our nation’s history,” he said.
All in all, those on the creative and technical side of Web3 will undoubtedly be closely monitoring the proceedings of the agreement, as the outcome undoubtedly has far-reaching implications for the future of the blockchain industry in the United States.
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Editor’s note: This article was written by an nft now staff member in collaboration with OpenAI’s GPT-4.
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