If cryptocurrency is the future of finance, miners who depend on dirty fuels could ultimately pay more than others. However, proponents of implementing a crypto tax believe it could prevent the dire consequences of inaction.
What's happening?
As Forbes detailed, widely adopting cryptocurrency for financial transactions could cause environmental ruin, given that crypto mining requires massive amounts of energy and water.
What's more, crypto operations can generate enough noise to be a public health menace, leading to a lawsuit against a facility in Texas.
While different types of crypto exist, Bitcoin is one of the most recognizable names. However, validating just one Bitcoin transaction — a process that involves solving complex mathematical puzzles — can gobble up as much power as a person in Germany does over three months, Forbes reported.
Because of this energy drain, many countries are proposing taxes on cryptocurrency mining, and some governments are already restricting operations.
Why would cryptocurrency taxes be helpful?
Fortunately, clean energy solutions like solar and wind are making headway, but the world is still heavily reliant on fuels like gas, oil, and coal, which release toxic fumes associated with millions of annual premature deaths when burned. In fact, dirty energy consumption reached record highs in 2023, according to the Energy Institute.
Ultimately, policymakers argue that taxing cryptocurrency mining could significantly reduce long-term harm by incentivizing miners to adopt renewable, non-polluting power or otherwise improve their operations' energy efficiency.
For instance, a task force at the 2024 United Nations Climate Change Conference proposed a $0.045 per kilowatt-hour climate tax for miners, a levy that would bring in as much as $5.2 billion every year, per Forbes.
The Biden administration also suggested a 30% tax on electricity consumed by crypto miners. However, the report speculates it is unlikely the incoming administration will be on board.
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Definitely 👍 Speaking at a Bitcoin conference in July, President-elect Donald Trump called for the United States to become the "crypto capital of the planet," per the Associated Press.
What else is being done to limit harm from cryptocurrency operations?
A number of companies are actively working to reduce or offset pollution from crypto operations, including Alephium, whose "proof-of-less-work" blockchain is more energy efficient.
Meanwhile, cryptocurrency network Ethereum's shift to a "proof-of-stake system" resulted in an incredibly promising decrease in energy consumption — more than 99.9%.
You can contribute to a cleaner future by educating yourself about greenwashing and leveraging that knowledge to invest in and support companies committed to sustainable actions and future growth.
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