The infrastructure bill’s ambiguous language, whether intentional or not, poses an existential threat to the Bitcoin mining business in the United States.
The United States Senate voted on August 10 to enact a $1 trillion bill to revive America’s infrastructure. The Senate’s entry into crypto law has been a disaster from the perspective of the crypto community, particularly miners. Unless the bill’s language defining brokers is clarified, it will stymie the growth of a domestic business just as it is taking off.
The bill, as worded, provides for numerous interpretations of the term “broker.” There is no real debate — or ambiguity — in the English language about what a broker does. A broker is defined as “one who works as an intermediary: such as […] an agent who negotiates contracts of buy and sale (as of real estate, commodities, or securities)” by Merriam-Webster. Brokers in conventional finance buy and sell financial assets for their clients, such as stocks and bonds. Compare this to Bitcoin (BTC) miners, the major cryptocurrency. Unlike brokers, Bitcoin miners solve cryptographic problems to validate new blocks, which is required for the Bitcoin network to function. Miners are compensated with Bitcoin for delivering this computation service. As a result, they are categorically not brokers.
Unfortunately, the Senate bill includes extremely wide and vague language in its definition of “broker”:
“Any person who (for consideration) is accountable for delivering any service that effectuates transfers of digital assets on behalf of another person on a regular basis.”
A risk to the Bitcoin mining business
By defining a broker in this manner, the bill requires mining firms to give authorities with the same information that a stockbroker is required to submit, such as taxable net gain or loss, buyer/seller name, transaction amount, and transaction location. Simply explained, miners have no way of collecting this information because they only validate blocks, not the information contained within them. As a result, if miners are classified as brokers under this phrase, they will be unable to comply with the law. This uncertainty, whether intended or not, poses an existential threat to the Bitcoin mining sector in the United States.
Crypto mining is essential for the operation of proof-of-work cryptocurrency networks, the most well-known of which is Bitcoin. Many of the innovative characteristics of blockchain technology would not be possible without mining. Mining, for example, enables characteristics such as decentralization, accountability, verification, and security. There is no Bitcoin network without mining.
The crypto mining sector in the United States is currently expanding. The country’s features like as a stable government, inexpensive electricity, abundant land, and a strong economy have made it an appealing destination for crypto miners. Bitcoin usage is growing, both among consumers and businesses; as acceptance spreads, the U.S. industry is hiring financial professionals, software developers, engineers, marketers, and facility managers.
Many Americans have Bitcoin balances, and many people around the world use Bitcoin to transfer wages and money to family members in other nations. Citizens in nations with mismanaged currencies are relying on the Bitcoin network to keep their purchasing power afloat in the face of fast declining currencies. In short, the United States is a key player in a fast expanding market that benefits millions of people. And this role is expanding as China, which does not trust Bitcoin’s decentralized, market-based ethos, has tried to ban mining within its borders.
The Senate bill grabs triumph from the jaws of defeat. While crypto mining in the United States is expected to grow rapidly, the uncertainty produced by the bill’s unclear phrasing is stifling investment. This is something we’ve seen directly at our organization. Employment, wages, and consumer spending have been halted as a result of the bill, which is a terrible irony considering that the policy’s aim is to promote economic growth and job creation.
Unless the bill’s language is altered to indicate that miners are not brokers, the United States may miss out on various benefits offered by crypto mining, such as grid stability, capitalization of stranded energy, and repurposing of wasted energy. Crypto mining contributes to grid stability by assisting utilities in balancing supply and demand. When energy is cheap and plentiful, miners maximize earnings, whereas utilities generate money when prices are low. When energy demand and prices rise, crypto miners cease mining, releasing energy supply to the grid and lowering rates for other users.
Energy usage and cryptocurrency mining
The narrative that cryptocurrency mining burns electricity is incorrect. Crypto mining does not waste energy, but rather uses energy that would otherwise be wasted. Energy companies’ output is not fine-tuned to completely match supply and demand. Because of mismatched supply and demand, energy is frequently created but not utilised, and/or is lost due to transmission over large distances.
The most cost-effective miners are near the utility’s power. The Bitcoin that these miners “generate” does not create more demand for energy, but rather uses energy that would have been produced otherwise. As a result, crypto miners support a more robust grid, minimize energy waste, and produce profits that utilities may utilize to move operations away from fossil fuels and toward renewable energy sources, in addition to giving investment and jobs to local economies.
There is yet some hope.
Given these and other advantages, the Senate’s anti-crypto mining stance is both perplexing and demoralizing. However, there is still a chance that the bad phrasing will be corrected by the United States House of Representatives. Although the suggested amendments to the Senate infrastructure bill were not adopted, the fact that they were offered at all shows that crypto mining has some support in the Senate. A different infrastructure measure could be passed by the House of Representatives. If this occurs, House and Senate negotiators may draft a final measure stating that crypto miners are not brokers. This would be the most beneficial outcome for the industry and the economy.
Because the demand for Bitcoin and other cryptocurrencies is expanding, crypto mining will take place somewhere. It would be beneficial to the US economy and the environment if the crypto mining business expanded domestically. The first step toward making the United States a leader in crypto mining is to make it clear that miners are not brokers. Failure to do so will have long-term consequences, preventing the United States from being a leader in this rapidly growing industry.