The Biden administration has proposed a 30% excise tax on cryptocurrency miners and plans to eliminate tax-deductible losses related to wash-trading of crypto tokens.
The proposal, published in a U.S. Department of Treasury document, aims to address the negative environmental effects of the growing energy consumption associated with digital asset mining.
The Treasury Department has stated that any company using computing resources to mine digital assets, whether owned or borrowed, will be subject to the tax. The tax is expected to be introduced over three years in 10% annual stages, beginning from December 31, 2023.
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 administration believes that the proposed tax will help reduce the negative environmental impact and the energy price hikes on those who share an electricity grid.
The Biden administration also aims to close tax loopholes related to wash-trading of digital assets. Wash trading for tax purposes refers to investors selling a financial instrument for a loss to claim the deductible and then immediately buying it back.
As digital assets are not classified as securities, crypto traders can claim tax-deductible losses on losses and then immediately repurchase tokens. However, stocks and bond traders are prohibited from repurchasing the same securities for 30 days.
President Biden’s 2024 Fiscal Year budget includes a proposal to apply “wash sale rules” to digital assets. The U.S. is expected to apply the same restrictions on crypto from December 31, 2023. The White House has estimated that the country might raise US$24 billion by fixing the loophole.
