The US government budget for 2024 has a nasty surprise in store for US bitcoin miners. A 30% tax on their electricity is proposed.
Tax Americana
The US Treasury Department unveiled its budget. In all, $6.9 trillion in spending. Problem, the receipts will be only 5,000 billion, in spite of the broad increases in taxes proposed by the democrats.
Before talking about the consequences of this tax on bitcoiners, let’s take this opportunity to remember that it is precisely because of the abysmal debt of governments that Bitcoin is so successful…
The budget deficit of 2024 will be around 2000 billion dollars! As much money as it will take to borrow/print.
According to a report of Budget and Economic Outlook (CBO), debt interest will be $640 billion in 2023, compared to $352 billion in 2021 and $475 billion in 2022.
The reason is rising interest rates. Here is the evolution of the US 2-year rate:
Bond markets look almost broken. »
Within a decade, the CBO predicts that interest will represent the first budget. More than that of defense ($842 billion).
This is how states “roll over” their debt. They borrow to repay previous borrowings, which is an exponential mathematical process…
Hence the “Quantitative Easing”. The Fed currently holds $6 trillion in US debt. Or 20% of the public debt for which the US government no longer pays interest (the Fed pays the interest to the federal budget).
Like lower rates, QE serves to slow the exponential effect of interest. This serves to buy time, and sooner or later the QE will restart. And in the absence of an energy miracle, this headlong rush will lead straight to hyperinflation.
Hence the interest of saving in bitcoin and not in dollars. This loophole is disturbing in high places, hence this new attack in the form of a tax on BTC miners.
Texan bitcoin miners in the crosshairs
If passed, the tax will be introduced gradually, at the rate of an additional 10% per year. A hard blow for minors who are at 37% in the United States according to the University of Cambridge.
And especially in Texas where miners are known to create synergies with local energy companies. The latter have gained a constant source of income with the advantage of also being a load shedding tool during peak consumption. Win-win situation…
Unsurprisingly, this tax provoked an outcry from the side of Texan miners. Riot VP Pierre Rochard says on twitter :
“This proposal would push the Bitcoin hashrate towards foreign adversaries with polluting (CO2) power plants. It is bad policy. »
It is true that shrinking miner margins could trigger an exodus. On the other hand, it is not certain that electricity will become more carbon-intensive. Rather, an estimated 91% of new hashrate settled near renewable energy sources in the first two months of 2023.
Faced with rising carbon energy prices (gas, coal), miners have no choice but to embrace renewable energy. The miner Marathon, for example, recently redeployed 300 MW (about 3 PE) from a coal-fired energy source to a wind source.
Many miners will certainly settle in Latin America where surplus electricity (therefore inexpensive) is essentially of hydraulic origin.
If the discontent of the flagship of the Riot mining industry is understandable, others will see a welcome decentralization.
A bad for a good ?
This murderous taxation would be a godsend for two reasons. The first is that it offers a 30% advantage to off-grid miners.
It’s sort of an indirect subsidy for nimble miners making the effort to find the otherwise wasted sources of electricity. The French Big Block Green Services is one of them, always on the lookout for hydraulic surpluses all over the world.
The scattering of miners all over the planet also makes it possible to avoid the scenario of a government and concerted seizure. Unlikely, but you never know what the future holds.
It is also good news for the expansion of mining around flares which are responsible for gigantic emissions of methane into the atmosphere.
According to Daniel Battenfacilities that mitigate these greenhouse gas emissions are booming:
“Mining subsidizes renewable energies, stabilizes their intermittency and reduces methane emissions. And you ain’t seen nothing yet! What will come online in 2024 will eclipse everything that has been done so far. »
Second reason to rejoice in a possible exodus of American miners: the possibility for small countries to get their hands on bitcoins.
Countries plagued by inflation necessarily have low foreign exchange reserves and therefore strict capital controls. Clearly, it is impossible for local exchanges to buy BTC abroad.
We need a mining industry in every country in the world. The arrival of minors in Paraguay, Argentina or El Salvador would be very good news.
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