The U.S.-based crypto mining firms and individual crypto miners could pay a heavy tax of 30% on electricity usage from the next year as President Joe Biden proposed an amendment in the budget proposal.
The Department of the Treasury released a Fiscal Year 2024 Revenue Proposal on March 9. The document states that crypto-mining activity has “negative environmental effects.” Also, it prompts uncertainty and risks to “local utilities and communities, as mining activity is highly variable and highly mobile.”
By charging excessive tax on electricity usage, the government wants to cut down crypto mining activity and its impacts on the environment.
The proposal asks to impose a 30% tax on the total electricity costs used in digital asset mining by a firm or leased mining facility.
In the same proposal, one more amendment has been put forward that increases the burden for crypto traders and investors. To prevent abuse, the authority suggests ‘wash sales rules’ for digital assets.
The Wash Sale rules on digital assets would close the tax-loss harvesting technique, in which traders fall into quick sell and buy of digital assets to reduce offset taxes on any capital gains income subject to taxation. Countries like Canada and Australia have already implemented wash sales rules in place.
In an interview, Danny Talwar, head of tax at Koinly, said, “If the rule is applied, the timing is significant as many crypto holders who entered the crypto space on the back of 2021 market peaks are suffering from heavy losses”.