President Biden has set his sights on the American Bitcoin mining industry, urging Congress to take decisive action. Drawing inspiration from China’s regulatory approach, Biden's administration is pushing for measures that could potentially cripple the thriving sector.

Despite the green light for Bitcoin ETFs, the U.S. has adopted an aggressive stance towards cryptocurrency regulations. Now, the focus is squarely on Bitcoin mining, a cornerstone of the industry since its inception. Surprisingly, the administration seems determined to dismantle the sector, despite its operation on a comparatively cleaner energy grid.

Instead of fostering a business-friendly environment or recognizing the value brought by a domestic Bitcoin mining industry, the Biden administration reintroduced a contentious proposal in March. The proposal seeks to impose a 30% excise tax on electricity used for Bitcoin mining, dubbed the Digital Asset Mining Energy tax (DAME). This draconian measure threatens to drive American Bitcoin miners, including major players like RIOT Platforms and Marathon Digital Holdings, to seek refuge elsewhere.

Senator Cynthia Lummis, a Wyoming Republican, has criticized the proposed tax, warning that it could obliterate the industry's foothold in America. The Biden administration initially floated the DAME tax in May 2023, only to face swift opposition from lawmakers and industry leaders. However, it resurfaced as part of the fiscal 2025 budget proposal, with claims that it would generate $3.5 billion over a decade.

The White House justifies the tax as a means to make miners bear their fair share of costs on local communities and the environment. However, it fails to acknowledge the exponential growth of the sector, with the U.S. emerging as the world’s largest Bitcoin mining market in 2022.

The administration's strategy could have unintended consequences. The DAME tax risks driving less efficient miners out of business or pushing them to jurisdictions with lax environmental standards. Even environmentally conscious miners could struggle to survive, jeopardizing the industry's commitment to sustainability.

The repercussions extend beyond the industry itself, leading to job losses and reduced tax revenue. Contrary to Biden's assurances of increased revenue, the tax could have the opposite effect. Moreover, the administration acknowledges the possibility of the industry relocating to areas with dirtier energy production.

Rather than demonstrating bold leadership, the administration cites other countries' efforts to restrict crypto asset mining, notably China. This raises concerns that Biden may propose a total moratorium on mining if the tax fails to pass.

Given the potential ramifications, it would be wise for the administration to seek industry feedback before proceeding with the DAME tax. Crypto advocates represent a significant and politically active constituency, particularly in coastal states. Shelving the tax could bolster support for Democrats, potentially swaying voters who favor a more favorable approach to Bitcoin.

Ultimately, reconsidering the proposal would be in America's and the world's best interest, ensuring the continued growth and sustainability of the Bitcoin mining industry.