Brook Taube on Biden’s Crypto Tax: It Misses the Point

The American government's position on crypto has characterized itself over the past decade for its lack of consensus on how to approach crypto regulation. While some lawmakers have recognized the potential benefits of embracing cryptocurrencies, others remain skeptical and concerned about the associated risks, despite having profited from crypto themselves. President Joe Biden's recent proposal for a crypto tax plan is now making the “slalom course” even murkier, according to financial expert Brook Taube.

Announced earlier this month, the sole purpose of the Digital Asset Mining Energy (DAME) excise tax proposed by the Biden administration is “making cryptominers pay for costs they impose on others.” According to the announcement, the 30% tax on all electricity used by crypto mining operations would raise $3.5 billion in a 10-year period while also mitigating the “environmental costs of current practices.''

“The environmental impact of cryptocurrencies has been a matter of heated debate over the years, especially since the coverage by the New York Times some years ago,” says Taube, referring to a controversial 2021 article. “Unfortunately, most of the debate seems to have been used for political and PR purposes rather than to actually find common ground.”

Taube is well-known for having built several billion-dollar companies and providing capital to more than 500 companies across North America. He has personally poured millions of dollars into companies disrupting the blockchain and fintech industries, as well as several philanthropic efforts.

“The arguments being used by both sides to support and oppose DAME are not new at all. If the government wanted to tax crypto mining, it could have done so years ago,” continues Taube. “The fact that this is being done just now not only makes such taxation less effective due to Bitcoin’s halving but also makes many people question the motives behind it.”

The effects of the environmental debate have negatively affected crypto adoption. Citigroup found back in 2021 that awareness of the environmental impact of cryptocurrency could deter investors from investing in cryptocurrencies relying on mining while also prompting the government to intervene. Companies like Square were quick to join the debate, claiming that Bitcoin and mining activity could in fact “accelerate the global energy transition to renewables.”

History has also shown that banning cryptocurrency mining to protect the environment does, in fact, have the opposite effect. When China banned cryptocurrency mining, most mining operations didn’t close but just moved elsewhere, with the majority choosing Kazakhstan and the United States. This migration resulted in these operations relying on fossil fuels like coal and natural gas instead of renewable sources, exacerbating the problem.

“This legislation is missing the point. If we want to stop the negative environmental effects of crypto mining, we need to ensure it is done with the environment in mind,” adds Taube. “Not only is crypto’s environmental impact not as negative as described but many experts have already explained how to turn it into a positive.”

A 2023 report by the Bitcoin Mining Council found that 58.9% of all energy used by Bitcoin mining was generated by renewable sources, creating demands for cleaner energy alternatives. Crypto mining’s energy requirements have also proven to be not only lower but also more flexible than those of other industries, meaning they can operate by generating, using, and storing energy at times of low demand, ensuring that no energy is lost at times of low demand while also contributing to the grid.

“John von Newmann already talked about this back in 1955 when he explained the proportionality between ‘more and cheaper energy, more and easier controls of human actions and reactions, and more and faster communications’,” concludes Taube. “The focus on the environmental impact of crypto instead of that of other industries is caused by a lack of understanding of the potential the technology has.”