Crypto mining tax rates to rise? All about IMF’s new proposal

• IMF proposes electricity tax hikes on crypto miners 
• Per the agency, the levy would help address miners to reduce their carbon footprint. 

Executives from the International Monetary Fund (IMF) have proposed an 85% electricity levy hike on Bitcoin [BTC] and crypto miners to effectively curb carbon emissions associated with cryptocurrency mining. 

The proposal was based on the climate impact of crypto miners and AI data centers. Per IMF, crypto mining will produce 0.7% of carbon emissions by 2027.

If data centers are included, it would mean 1.5% of world carbon emissions by 2027. 

“Crypto mining could generate 0.7 percent of global carbon dioxide emissions by 2027. Extending the analysis to data centers (based on IEA estimates) means their carbon emissions could reach 450 million tons by 2027, or 1.2 percent of the world total.”

Will the tax hike solve emissions from crypto miners?

The report added that mining a single BTC was equivalent to 3-year electricity consumption by an average person in Ghana or Pakistan.

As of 2022, crypto mining and data centers accounted for 2% of world electricity consumption. According to the IMF report, this would climb to 3.5% by 2027, rivaling Japan’s electricity demand. 

To mitigate this, the agency floated a direct electricity tax of $0.047 per kilowatt-hour to encourage miners to manage their emissions. The IMF proposed a further 85% hike for miners to address air pollution. 

“If considering air pollution’s impact on local health as well, that tax rate would rise to $0.089, translating into an 85 percent increase in average electricity price for miners.”

The agency also criticized current tax regimes with ‘generous tax exemptions,’ stating that the benefits of current tax regimes on miners were unclear.

Per IMF, the proposed levy hike would reduce annual carbon emissions by 100 million tons, equivalent to current Belgium emissions. 

Russia recently cautioned that crypto mining might disrupt electricity in the nation. However, the country has since passed a bill to enable controlled crypto mining. 

Other countries like China and Venezuela have a total ban on crypto mining. How other countries will adopt the proposals remains to be seen.