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(Kitco News) - Bitcoin miners have become the latest focal point in the ongoing surge in activity related to the regulation of the cryptocurrency ecosystem in the U.S., as several states have recently proposed legislation to guard the nascent industry against government interference.
In Arkansas, Republican state Senator Joshua Bryant proposed the Data Centers Act of 2023, which seeks to protect miners from discriminatory regulations and taxes with clearer guidelines. The Act recognizes “that data centers create jobs, pay taxes, and provide general economic value to local communities.“
The bill was proposed on March 30 and has already been approved by both the Arkansas House of Representatives and Senate. It now awaits the approval and signature from the governor of Arkansas before it becomes official law.
According to the text of the bill, digital asset miners are required “to pay applicable taxes and government fees in acceptable forms of currency and operate in a manner that causes no stress on an electric public utility’s generation capabilities or transmission network.“
The legislation will also grant crypto miners the same rights as data centers, stating, “A local government shall not impose a different requirement for a digital asset mining business than is applicable to any requirement for a data center.”
The Arkansas initiative follows a similar move in Montana, where the state Senate recently passed a bill designed to protect crypto miners operating within the state.
Included in the text of the bill is a proposal to protect both individual and commercial miners in Montana against discriminatory laws by shielding them from taxes on digital assets used as a means of payment. It also looks to allow individuals who operate crypto miners out of their homes to continue to do so as long as they use less than 1 megawatt of energy annually and do not violate existing noise bylaws.
The bill also seeks to eliminate any energy rate classification that discriminates against home crypto mining and digital asset businesses.
The State of Mississippi is also working on similar legislation. On February 8, the Mississippi State Senate passed the Mississippi Digital Asset Mining Act, which legalized home digital asset mining and the operation of mining businesses in areas zoned for industrial use.
Additionally, the bill also prohibits limiting noise from home mining beyond existing limits, imposing requirements on miners beyond those locally applied to data centers, or changing the zoning of a mining center without proper notification and an opportunity to appeal.
The Public Service Commission, which regulates utilities, has also been prohibited from imposing discriminatory rates on mining businesses and exempts home and business miners from money transmitter status.
There is currently a companion bill under consideration in the Mississippi House of Representatives.
Headwinds for crypto miners
Meanwhile, the state of Texas has opted to move in the opposite direction based on recently passed legislation by its Senate Committee on Business and Commerce, which looks to remove incentives for miners operating under the state’s crypto-friendly regulatory environment.
On April 4, the committee voted 10-0 to move forward with Senate Bill 1751, which would amend sections of Texas’ utilities and tax code to add restrictions for crypto mining facilities.
Based on the text of the bill, the demand response program that provides compensation for load reductions during times of grid strain is open to crypto mining facilities “only if the anticipated demand for all facilities of that type participating in the program is less than 10 percent of the total load required by all loads in the program.”
Certain crypto mining firms would also not receive an abatement on state taxes for participation in the program starting in September.
According to Dennis Porter, the CEO of the Satoshi Action Fund and a Bitcoin mining advocate, the new bill would “eliminate incentives for miners to create jobs in rural communities and caps the amount that miners can participate in certain grid balancing programs.”
Texas has been one of the most open states when it comes to blockchain technology and cryptocurrency mining, but the recent struggles of its electricity grid to deal with intense changes in weather have led lawmakers to emphasize the importance of ensuring reliable energy transmission to retail consumers during emergencies.
Curiously, this latest bill stands in opposition to one introduced before the Texas legislature in March which was designed to attract more Bitcoin-related businesses to the state by legally protecting the rights of Bitcoin holders, miners, and developers.
According to the text of the bill, Bitcoin miners would be free to engage in mining without restrictions from any law or resolution and to seek out any form of energy for securing the Bitcoin network.
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At the federal level, crypto miners could soon be subject to a 30% tax on electricity costs based on the text of the budget proposal introduced by President Joe Biden on March 9 aimed at “reducing mining activity.”
According to the supplementary budget explainer paper released by the Department of the Treasury, “Any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.”
All firms that engage in digital asset mining will be required to report the amount and type of electricity used and the value of that electricity if purchased externally. “Firms that produce or acquire power off-grid, for example by using the output of a particular electricity generating plant, would be subject to an excise tax equal to 30 percent of estimated electricity costs,” the budget proposal said.
If passed, the proposal would be effective for all taxable years beginning after December 31. The excise tax would be phased in over three years at a rate of 10 percent in the first year, 20 percent in the second, and 30 percent for every year thereafter.
