MENA Bitcoin analysts weigh in on IMF crypto taxation solution

Shafik Hebous, and Nate Vernon-Lin, two executives from the IMF recently noted that crypto mining and data centres now account for 2% of global electricity use and nearly 1% of global emissions. They added that mining footprint is growing and could reach 3.5% in three years.

The executives called for the implemention of a tax system that’ll steer companies toward curbing emissions, opening the flood gates for opposing views and applauds, with MENA Bitcoin experts also weighing in.

IMF believes direct tax could curb crypto mining emissions

Shakif and Nate noted that the IMF estimates a direct tax of $0.047 per kilowatt hour would drive the crypto mining industry to curb its emissions in line with global goals.

They added, “If considering air pollution’s impact on local health as well, that tax rate would rise to $0.089, translating into an 85% increase in average electricity price for miners. Such a levy would raise annual government revenue of $5.2 billion globally and reduce annual emissions by 100 million tons (around Belgium’s current emissions).”

A September IMF paper found crypto mining could account for 0.7% of global carbon emissions by 2027. Adding that emissions from AI data centres could bring the total to 1.2% — 450 million tons of emissions in total.

MENA experts weigh in on IMF Crypto taxation solution

Speaking to Cryptopolitan, Talal Tabaa Founder and CEO of MENA based crypto exchange, CoinMENA, believes that the IMF’s proposal underscores a fundamental misunderstanding of Bitcoin, energy and free markets. He stated, “Such a tax would stifle innovation, increase costs, and be nearly impossible to enforce globally, hence the existence of tax havens.”

He also believes that this would push miners to less regulated areas. According to Tabaa deciding what energy use is good or bad should be left to free markets and not regulators.

The CEO said, “Taxing Bitcoin mining because of its energy use is as illogical as taxing airplanes for using more energy than sailboats, such logic stifles progress and innovation. Free markets should be allowed to evolve and address energy concerns naturally; otherwise, we’d all still be crossing the globe in sailboats.”

On the other hand, Mohamed El Masri, Managing Partner of UAE-based Hodler Investments, which recently launched a Digital Energy Fund from DIFC (Dubai International Financial Center) in UAE, believes that the IMF’s call to impose a power tax of $0.047 – $0.089/kWh on crypto and AI compute, respectively, is quite aggressive.

El Masri notes, “The positive thing about the IMF’s focus on crypto and AI compute is that it justifies the exponential growth that is expected for these industries. This should be a vote of confidence for international and institutional investors looking to allocate capital towards energy and compute infrastructure of the future.”

He asserts that the IMF’s serious consideration of this tax policy reflects their recognition of crypto and AI as substantial economic drivers. El Masri explained that if the IMF did not view these sectors as integral to the global economy, it would not be exploring measures to address their carbon footprints.

He further added that, “Implementing this tax policy could potentially open up new financing avenues for the IMF, including funding for carbon capture storage and utilization projects or even encouraging private sector investments. This could also lead to significant revenue opportunities through carbon credits for various stakeholders, including governments.”

Bitcoin mining companies are switching to AI

Already major Bitcoin mining companies have started to swap out some of their mining equipment in favor of rigs used to run and train AI systems. These pivots have been warmly received by investors, leading to the market cap of 14 major bitcoin mining companies jumping in value by 22%, or $4 billion, since the beginning of June, per a J.P. Morgan report in June 2024.

In a Time article, Nazar Khan, the COO and CTO of bitcoin mining company, Terawulf, stated, “If you go back five or 10 years, 80% of the data center loads were located in six or seven primary markets. Those markets are filled up, and a couple of them have already issued moratoriums on further data center construction. So those data center loads are now looking for new homes.”

Even investment firm, VanEck, noted that Bitcoin miners could generate additional revenues around $13.9 billion by 2027 diverting energy to AI and High-performance computing.

Core Scientific, the fourth largest Bitcoin miner by hashrate, recently landed a 12-year contract with AI hyperscaler CoreWeave. This deal is expected to generate over $3.5 billion in revenue by supplying 200 megawatts of infrastructure.