Cryptos are worried that the US market might shut them out if the Biden administration goes ahead with its plan to tax digital asset mining operations 30% of the electricity they use.
The percentage of US-based crypto nodes on the Bitcoin network exceeds 29%. If prices go up and other places become more appealing, though, that percentage could go down.
The Middle East is a new potential location because of its generally lower taxes, abundant energy sources, and generally less stringent environmental regulations.
Crypto mining operations have received over $800 million from the Omani government. The Hashrate Index estimates that the United Arab Emirates’ 400 MWh of Bitcoin mining capacity accounts for approximately 4% of the world’s total hashrate. U.S. mining companies may benefit from migration to the energy-rich region, according to advocates for the region.
There are a number of distinct geopolitical benefits to southern Oman as compared to the USA. Its proximity to the submarine cable pier makes it an ideal location for communication purposes. Green Data City CEO Olivier Onheuser told CoinDesk at the Bitmain Global Digital Mining Summit in Oman at the end of March that the country offers low power costs, reduced political risk, and favorable weather conditions for data centers. Green Data City is based in Oman.
In order to establish a 150-FARM Crypto facility in Salalah, southern Oman, Green Data City reached a $300 million agreement last year with Phoenix Group, the biggest digital asset mining company in the UAE. Bitcoin, Litecoin, and other crypto POWs will have their plants finished by the end of this year. During summer, Salalah reaches a relatively cool 27 degrees Celsius (81 degrees Fahrenheit), which is lower than the rest of the Middle East. The region also benefits from access to cool ocean water and has a mining license from Green Data City.
In 2023, a $406 million joint venture was signed by Digital Marathon (MARA) and Zero Two, with support from Abu Dhabi’s sovereign wealth fund, to construct the first Bitcoin mining facility in the Middle East region that is submersible. Although the hot desert summers can reach 50 degrees Celsius, cooling technology makes it possible for mining equipment to function at its best regardless of the weather.
Regional growth in the Middle East could be spurred by the ongoing US crackdown on crypto.
According to Foundry’s director of public policy, Kyle Schneps, US crypto mining volumes are expected to decrease upon passage of the electricity tax bill.
The Bitcoin mining industry in the US would surely collapse if electricity consumption was subjected to a 30% tax. In my opinion, there has never been an attack on the power grid like this one. According to him, this establishes a very risky standard.
The bill may hurt the American economy, according to Darin Feinstein, founder of CORE Scientific, a mining company.
In my opinion, this pertains to taxes. If this were to gain traction, it would undermine American control over our most valuable possession, which is why I don’t think it will. He warned that if we don’t do something to attract investment and technology, they will simply go elsewhere.
The economy has changed, and miners are feeling the pinch with impending tax increases and reduced block rewards as a result of Bitcoin’s recent halving in April. Phoenix Group co-founder and CEO Seyed Mohammad Alizadefard (Bijan) says this is just one more thing that US mining companies may consider.
It will be extremely difficult for Bitcoin miners with high electricity prices or older generation machines if the price doesn’t rise when supply is cut in half, regardless of the price point. He speculated that mining firms might relocate to the Middle East or another region without such regulations if the US bill were to pass.
The former director of communications for the White House and current partner at Skybridge Capital, Anthony Scaramucci, is of the opinion that the US is still a major hub for digital assets and mining.
He informed CoinDesk that the US presents an environment that is ideal for growth and innovation, even though regulations are uncertain. He also mentioned that many prominent cryptocurrencies and projects are already based in the US.
U.S. miners will face a choice if the new digital asset mining electricity tax bill passes: either stay put in the US market and hope the numbers work, or look for a new place to call home.