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Coin Geek
07-07-2025
- Business
- Coin Geek
US tax challenges for Bitcoin miners: A call for commodity-style reform
Getting your Trinity Audio player ready... In the high-octane world of Bitcoin mining, where hash rate dominance and operational efficiency drive shareholder value, U.S. miners face a formidable obstacle: an antiquated tax regime that squeezes margins and threatens market stability. Publicly traded heavyweights like MARA Holdings (NASDAQ: MARA), Riot Platforms (NASDAQ: RIOT), and CleanSpark (NASDAQ: CLSK) are sounding the alarm on IRS policies that impose immediate taxation on newly mined Bitcoin as ordinary income, followed by capital gains tax upon sale—a double-taxation burden not faced by traditional commodity industries like gold or oil. This structure forces miners to liquidate Bitcoin prematurely to cover tax liabilities, potentially flooding the market and destabilizing prices. As miners rally for tax alignment with commodities, the outcome could redefine their capex strategies, hash rate scalability, and competitive edge in a post-halving environment where every joule and dollar counts. The crux of the issue lies in the IRS's classification of Bitcoin as property rather than a commodity. When miners like Bitdeer (NASDAQ: BTDR) or Core Scientific (NASDAQ: CORZ) validate a block and earn Bitcoin rewards, the fair market value of those coins is taxed immediately as ordinary income, often at rates exceeding 37% for high-earning corporations. If the Bitcoin is later sold—whether to fund fleet upgrades or cover opex (operating expenses)—miners face capital gains tax on any price appreciation, effectively taxing the same asset twice. This contrasts sharply with commodities like gold, where miners incur no tax liability until the asset is sold. For MARA Holdings, which reported a record-breaking Q1 2025 with 23 joules per terahash (J/TH) efficiency and 49,179 BTC in treasury reserves, this tax structure creates a liquidity crunch, forcing sales that erode their HODL (hold on for dear life) strategy and limit reinvestment in next-generation ASICs like Bitmain's Antminer S21 Pro (17 J/TH). The financial strain is acute in today's mining environment, where costs have surged 34% to over $70,000 per BTC due to rising energy prices and network difficulty hovering at 126.4 trillion. Post-halving economics, with block rewards slashed to 3.125 Bitcoin, amplify the pressure. Riot Platforms, operating one of North America's largest mining facilities, has highlighted how premature BTC sales to cover taxes disrupt long-term value creation, particularly as global hash rate nears 1,000 EH/s (exahashes per second). CleanSpark, targeting 32 EH/s by year-end, relies on modular infrastructure and low-cost power to maintain margins, but tax-driven liquidations divert capital from scaling operations. As Abundant Mines CEO noted, 'Aligning Bitcoin taxation with commodities would reduce forced selling, stabilize market dynamics, and unlock investor confidence.' The market implications are significant. Forced liquidations by U.S. miners, who control over 31.6% of global hash rate, could flood the market with BTC supply, depressing prices and rattling investor sentiment. Core Scientific, which has diversified into high-performance computing (HPC) to hedge mining volatility, warns that excessive sell pressure undermines BTC's store-of-value narrative. The Bitcoin Mining Council estimates that U.S. miners' HODL strategies, with reserves surpassing many ETF holdings, make their tax treatment a linchpin for price stability. A commodity-style tax framework—deferring taxation until sale—would allow miners to retain Bitcoin on their balance sheets, enhancing financial flexibility and reducing market-disrupting liquidations. Achieving reform, however, is no small feat. The IRS has long resisted reclassifying digital assets, citing concerns over tax evasion and regulatory complexity. Political gridlock in Washington, especially amid broader digital currency policy debates, further complicates the path forward. Miners like Hut 8 (NASDAQ: HUT), with low-cost operations in Canada achieving sub-3-cent-per-kWh power costs, are exploring cross-border strategies to mitigate U.S. tax burdens, signaling the risk of capital flight. Jurisdictions like Canada and Brazil, with favorable energy profiles and regulatory climates, could siphon investment if U.S. policies remain punitive. Publicly traded miners are adapting through operational ingenuity. Bitdeer, with 11.4 EH/s in hash rate, has leaned into yield strategies like staking to offset cash flow constraints. Riot Platforms has secured power purchase agreements at sub-4-cent-per-kWh rates to preserve margins, while MARA's disciplined fleet management drives efficiency gains. Yet, these are stopgap measures. As MARA's CEO Fred Thiel stated in a recent earnings call, 'A fair tax structure is critical to scaling our operations and competing globally.' The Financial Accounting Standards Board's 2024 shift to fair value accounting for digital assets offers a precedent, but legislative action is needed to align taxation with commodities. The industry's push for reform is gaining momentum, intensifying lobbying efforts through groups like the Bitcoin Mining Council. A successful outcome could unlock significant value, enabling miners to reinvest in infrastructure, optimize energy efficiency (e.g., sub-20 J/TH rigs), and scale hash rate to capture block rewards. Failure to reform risks eroding the U.S.'s position as a mining hub, potentially redirecting capital to more favorable jurisdictions. Tax equity will be a defining battle for long-term sustainability as miners navigate rising difficulty and energy costs. In conclusion, the U.S.'s outdated tax regime poses a critical challenge for Bitcoin miners, forcing premature sales that threaten financial stability and market dynamics. Aligning Bitcoin's tax treatment with commodities could empower miners to scale operations, strengthen balance sheets, and maintain global competitiveness. For publicly traded miners, the fight for reform is not just about margins—it's about securing the future of U.S. Bitcoin mining. Watch | Mining Disrupt 2025 Highlights: Profitable trends every miner should know title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Khaleej Times
02-06-2025
- Business
- Khaleej Times
The global tax game: How UAE is winning while London forgets its own playbook
In any game, it's not just how you play — but how others play — that can work to your advantage. This perfectly captures the ongoing shift in global tax dynamics, particularly in the United Kingdom. According to the 2024 Global Migration Report, over 9,500 high-net-worth individuals (HNWIs) have exited the UK — a number that is only expected to grow. One of the most significant catalysts for this exodus is the upcoming overhaul of the UK's non-domiciled (non-dom) tax regime, effective 6 April 2025. Let's break down what's changing—and why the UAE stands to gain the most. What Was the Non-Dom Regime? Until 5 April 2025, UK residents who were classified as non-domiciled could benefit from the remittance basis of taxation. This meant: They were only taxed on foreign income and gains (FIG) if these were brought into (remitted to) the UK. This allowed wealthy individuals to accumulate global income offshore without facing UK tax obligations - so long as they kept the money abroad. This system made the UK attractive to wealthy foreigners. But the landscape is about to shift. What's Changing from 6 April 2025? The UK government is abolishing the concept of domicile as a key factor in taxation and replacing it with a residence-based system. The key changes include: End of the Remittance Basis: All UK tax residents will be taxed on their worldwide income and gains, regardless of domicile status, after a transitional period. Transitional Relief: o For 2025–2026, only 50% of foreign income will be taxed if switching from the old to the new system. o A special 12% tax rate applies to foreign income earned before 6 April 2025 if remitted in the 2025–26 or 2026–27 tax years. Ultimately, after four years of UK tax residence, individuals will be taxed like any other UK resident—with no FIG exemptions. Who will this impact the most? These changes primarily affect HNWIs and global families who historically relied on the non-dom regime to protect their offshore wealth from UK taxation. The shift not only undermines long-standing tax planning structures but also reduces the UK's appeal as a global hub for mobile capital and top-tier talent. How the UAE stands to gain As capital chases efficiency, tax policy plays a decisive role in location selection. The UAE, with its 0% personal income tax regime, robust financial infrastructure, and world-class quality of life, emerges as a natural haven. Here's why the UAE is poised to gain the most: Strategic location: Needless to mention not just close to Europe - but at the crossroads of East and West, connecting global markets with ease. Stability and predictability: In a rapidly changing tax world, the UAE offers clarity, consistency, and long-term visibility for individuals and families. With a bold vision and cautious implementation of compliances, it emerges as a strong contender. Transparent and rules-based Golden Visa regime: Unlike jurisdictions such as Singapore - where the PR process is often seen as opaque and discretionary- the UAE has published its Golden Visa rules in black and white, creating a rules-based and inclusive system that welcomes both wealth and talent. Limited competition: With Hong Kong effectively out of the race due to political and regulatory concerns, and while traditionally leading in the race, Singapore, it's PR regime becoming increasingly restrictive, the UAE is among the very few jurisdictions offering competitive, clear, and welcoming advantages. The bigger picture: The global tax game The UK's tax reform is part of a larger pattern: nations are rewriting tax codes to balance fairness, revenue, and global competitiveness. But when one jurisdiction tightens its rules, others gain ground. For the UAE, this is not just a short-term win - it's a long-term opportunity to attract global talent and wealth. Follow us for more insights in our series: The Global Tax Game —where we explore how countries are competing to attract capital through smarter tax policies.
