The future of Riot Platforms (RIOT) and Marathon Digital (MARA) might be in jeopardy as the United States government plans to introduce a new tax policy that may target cryptocurrency mining. The proposed law could impose higher taxes on RIOT and MARA, making it less attractive for them to continue their mining operations in the country. Here’s what you need to know about the potential impact of this proposed law.
What is the new proposed crypto mining tax law?
The U.S. Congress has proposed a new law that would require miners to pay taxes on newly mined cryptocurrencies. The law would treat cryptocurrency mining as a separate taxable event, meaning miners would have to pay taxes on the coins they’ve mined as soon as they’re received. The proposal would make crypto mining taxes equivalent to those of stocks and other securities that are taxed when bought and sold.
What does this mean for RIOT and MARA?
RIOT and MARA are two of the largest cryptocurrency mining companies in the United States. They rely on large-scale mining operations to generate profits, with RIOT accounting for over 1.5% of the total global Bitcoin mining hash rate. Together, the two companies have a market capitalization of over $7 billion and have been at the forefront of the crypto mining industry’s growth in North America.
The introduction of a new crypto mining tax policy could significantly impact RIOT and MARA’s revenues and profitability. Their mining operations would become more expensive, and this could lead to higher operational costs and lower profit margins. If the proposed law passes, these companies may face an increased tax burden, which could hurt their ability to remain competitive in the market.
However, the impact of the proposed law on RIOT and MARA could be limited. This is because both companies are already profitable, and they have the financial strength to withstand any tax increases. Moreover, the proposed tax policy may only impact miners who earn high profits, and it is unlikely that it will be implemented immediately.
What is the potential impact on the crypto mining industry?
The introduction of a new tax policy could have far-reaching consequences for the crypto mining industry. It could lead to a reduction in the number of companies operating in this sector, as smaller operations may not be able to compete with larger ones that have the financial resources to pay the taxes. This could lead to a concentration of market power in the hands of a few mining companies, making it harder for smaller players to enter the market.
Moreover, the proposed tax policy could encourage crypto miners to relocate to other countries with more favorable tax policies. This could lead to a decline in the demand for electricity in the United States, as a significant portion of the country’s electricity is currently used for crypto mining. Furthermore, the policy could lead to a reduction in the demand for mining equipment and components in the United States.
The proposed crypto mining tax policy could have significant implications for the crypto mining industry, with RIOT and MARA being two of the largest companies that could be impacted. While the policy could lead to higher taxes, RIOT and MARA are still profitable, and they have the financial resources to pay any extra cost. However, the policy could lead to a reduction in the number of mining companies operating in the United States, making it harder for smaller players to enter the market, and it could increase the concentration of power in the hands of a few large-scale mining companies.
U.S. President Joe Biden’s administration is looking to impose a punitive tax on crypto mining operations. The White House’s Council of Economic Advisers (CEA) argued in a blog post on Tuesday that the tax is necessary due to the “harm” crypto mining operations inflict on society. The CEA’s proposal involves a U.S. tax equal to 30% of a mining firm’s energy costs, an industry-specific penalty that could threaten the profits of such businesses.
The blog post states that currently, cryptomining firms are not required to pay for the full cost they impose on other parties in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate. While other energy-intensive industries won’t be similarly saddled with the new tax, the CEA contends that “cryptomining does not generate the local and national economic benefits typically associated with businesses using similar amounts of electricity.”
The Biden administration first proposed the excise tax in a March 9 document published by the U.S. Treasury Department. While the tax could raise up to $3.5 billion in revenue over the next 10 years, such proposals often fail to survive the process as Congress finalizes the nation’s spending plans.
Some of the largest U.S. mining firms, including Riot Platforms (RIOT), Marathon Digital (MARA), Cipher Mining (CIFR), Greenidge Generation (GREE), BitDeer (BTDR), and CleanSpark (CLSK), could be affected by the tax.
The administration’s Council of Economic Advisors also published a report in March detailing its wider concerns with the industry, including possible pollution and the costs of having mining firms move into local communities. Even mining firms that use clean energy could raise the overall energy costs and usage of the community around them, the post said.
Congressional Republicans have resisted efforts from regulators and the administration to penalize the crypto sector, so the Republican-controlled House may not be likely to embrace taxes that punish the industry.
In conclusion, the Biden administration’s proposal to impose a punitive tax on crypto mining operations could place a significant burden on the industry and threaten the profits of firms operating in this space. While the tax could generate significant revenue for the government, it remains to be seen whether such proposals will survive the legislative process.