Bitcoin miners appear to have dodged a bullet, as the congressional debt ceiling bill does not include a hefty tax on cryptocurrencies that had been proposed by the White House. But investors should be wary of future budget battles. Such proposals have a habit of rising from the ashes.

Over the weekend, lawmakers released the text of a bill that would raise the debt ceiling for two years and add limits on federal spending. Not included in the draft was a provision, proposed earlier by the White House, that would have imposed a special tax on cryptocurrencies equal to 30% of the cost of the electricity they use.

Digital Asset Mining Electrical Power Tax (DAME)

The White House had argued that the so-called Digital Asset Mining Electrical power (DAME) tax would offset the economic and environmental costs of cryptocurrency mining. Bitcoin miners vehemently opposed it.

Such a tax would have severely cut into the profits of miners like Marathon Electronic Holdings (ticker: MARA) and Riot Platforms (RIOT), whose shares are up 181% and 267% this year, respectively, on the back of Bitcoin’s rebound.

Some political analysts say that it’s premature to declare an outright victory,  as such proposals tend to rear their heads whenever Congress seeks funds to pay for new bills.

BTIG policy research director Isaac Boltansky indicates that any suggestion that the industry is safe from future tax efforts just because the DAME tax was excluded from the debt ceiling deal is disconnected from reality. He noted that the tax would have raised about $3.5 billion over 10 years.

Support for Bitcoin and the cryptocurrency industry has traditionally not fallen cleanly along partisan lines. Both Republicans and Democrats have in the past expressed support for encouraging an industry they see as having the potential to be a major job creator.

However, since last year’s cryptocurrency collapse, more Democrats have attacked the digital asset industry, and this month President Joe Biden even criticized Republicans for taking a stance on the debt ceiling that he said “protects wealthy tax dodgers and cryptocurrency traders.”

Cryptocurrency traders, which operate huge energy-intensive server farms, have been one of the most frequent targets of Democrats, who cite environmental concerns. In New York, lawmakers passed a partial ban on cryptocurrency mining. Even in Republican-controlled Texas, Bitcoin miners have been fighting lately against a bill that would limit their participation in programs that pay them to shut down during periods of high electricity demand.

Fred Thiel, CEO of Marathon, said in a statement to Barron’s that targeting a specific type of energy use in an attempt to save energy is an invasion of people’s right to choose how they use the energy they pay for. He argued that the proposed tax would not have benefited the environment or the energy grid.

This time, miners benefited from Republicans’ insistence that a debt ceiling bill not include new taxes, Boltansky says, but that won’t necessarily be the case in the battles to come.

Boltansky stated that once an item becomes part of the legislative menu, it tends to stay in the policy conversation.

By Marina Meza

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