Senator Lummis Denounces Biden’s 30% Bitcoin Mining Tax as ‘Dangerous Scheme,’ Publishes ‘Orange Paper’

Key Takeaways

• Senator Lummis recently opposed President Biden’s crypto mining tax.
• She criticized it for singling out the crypto industry as compared to other sectors.
• Senator Lummis emphasizes the strategic need to foster domestic Bitcoin mining for national security and advocates for energy-efficient and renewable practices within the industry.

In March, US President Biden once again proposed the Digital Asset Mining Energy (DAME) excise tax  as part of the 2025 federal budget to mitigate the economic and environmental impacts of cryptocurrency mining. 

To address emissions, the proposal calls for a 30 percent tax on the electricity costs of cryptocurrency mining. Critics argue that this policy unfairly targets a single industry for its energy consumption, which is comparable to that of many other industries and technologies, potentially setting a harmful precedent.

Lummis’ Stand Against the DAME Tax

Expected to raise about $3.5 billion over ten years, the DAME tax  targets the crypto mining industry’s substantial energy use and environmental impact, primarily to combat climate change.

On July 23, Senator Cynthia Lummis strongly criticized  the Biden Administration’s proposal to impose a 30% tax on electricity used by Bitcoin miners, flatly rejecting the idea. 

According to a Treasury document , the proposed tax phase-in was scheduled to last three years, starting at 10% and increasing by ten percentage points each subsequent year.

Speaking at Bitcoin Miami last week with Perianne Boring, the founder and CEO of the Chamber of Digital Commerce, Lummis asserted :

 “That isn’t going to happen. A 30% tax hike on any specific industry is a blatant attempt by the administration to pick winners and losers. I will not let President Biden tax the digital asset industry out of existence.”

The Wyoming Republican later emphasized her stance on Twitter, responding to reports about her comments at the conference. 

Lummis also suggested that Bitcoin miners might leave the US if the Biden Administration implements the proposed crypto mining tax, noting that “miners can mine anywhere.” 

Senator Cynthia Lummis, a vocal supporter of the crypto industry, has consistently criticized the Biden administration’s stance on decentralized finance (DeFi) protocols and non-custodial wallets.

In her latest effort, Lummis released an ‘Orange Paper’ detailing her objections to the proposed Digital Asset Mining Energy (DAME) tax.

Advocating for Economic and Environmental Benefits of Bitcoin Mining

The Orange Paper, “The Future of Bitcoin Mining: Strategic Considerations for the US,”  offers a comprehensive analysis of the economic, environmental, and regulatory facets of Bitcoin mining. The document highlights successful mining operations in Texas, North Dakota, and Kentucky that have rejuvenated communities.

It notes that Texas has streamlined Bitcoin mining, offering competitive energy prices and a flexible market. The paper also champions Texas’ power grid, which rewards adaptable energy users like miners, unlike California, which faces energy shortages  due to regulations,

Addressing environmental concerns, the paper champions the adoption of renewable energy sources in Bitcoin mining, suggesting that with appropriate regulations and incentives, the industry can shift towards more sustainable energy practices. It proposes utilizing flared gas and hydropower to reduce the environmental footprint of mining activities, citing successful examples in Iceland and Canada, where renewable energy predominates.

National Security and Regulatory Considerations

The ‘Orange Paper’ also discusses the national security implications of maintaining a strong domestic Bitcoin mining infrastructure. It argues for clear, supportive regulations that promote innovation and consumer protection while fostering the growth of the Bitcoin mining sector without compromising environmental and financial stability. It advocates for tax incentives for renewable energy use and stricter emissions standards.

Lummis also highlights the national security benefits of fostering domestic crypto mining, which could lessen reliance on foreign energy sources and bolster America’s standing in the global digital economy. The paper stresses the strategic necessity of maintaining a secure Bitcoin mining infrastructure to protect against cyber threats and uphold financial system integrity.

The DAME tax proposal  has frequently drawn criticism from industry figures and conservative circles, including voices from within the Democratic Party. 

Presidential candidate Robert F. Kennedy Jr. criticized  the proposal shortly after its announcement by the White House’s Council of Economic Advisers, calling it a “mistake” and arguing that it would stifle industry growth.

“It is a mistake for the U.S. government to hobble the industry and drive innovation elsewhere. Biden’s proposed 30% tax on cryptocurrency mining is a bad idea,” Kennedy Jr. expressed.

Harry Sudock, Chief Strategy Officer at GRIID, criticized  the DAME tax for its lack of sophistication in addressing energy usage intricacies. He highlighted that the tax did not account for the differences between peak and average electricity usage, which could hinder efficient energy management and discourage investments in new power generation. Sudock contended that this broad-brush approach may deter sensible energy consumption and investments in new energy infrastructure.

Expert analysis suggests the DAME tax may inadvertently hinder economic growth while attempting to address environmental concerns. Policymakers should collaborate with industry to find solutions that balance environmental protection with innovation.

Crypto’s Role in the Energy Debate

According to the Competitive Enterprise Institute , imposing a tax on cryptocurrency mining could inadvertently hinder the development of new technologies and negatively impact the industry’s own evolving conservation efforts. For instance, the mining sector is already enhancing its energy efficiency and transitioning to renewable energy sources. Policymakers should allow the cryptocurrency industry to continue its natural progression rather than impede its growth.

Moreover, the energy consumption of Bitcoin mining is comparatively less than that of traditional data centers and networks, as well as the conventional banking system. It is also similar to or lower than the power demands of industries like paper, iron, chemicals, and copper and gold mining. Labeling cryptocurrency as a significant energy consumer overlooks this broader context. The crypto industry is increasingly adopting renewable and low-emission energy sources such as nuclear and hydropower, often without governmental mandates. Some mining operations are even strategically located near low-emission energy sources, like Niagara Falls, while others utilize otherwise wasted energy, such as natural gas byproducts from oil fields.