The U.S. Treasury Department has finally given some clarity – and perhaps a sigh of relief – to Bitcoin (CRYPTO: BTC) miners with a 300-page proposal under the 2021 Infrastructure Investment and Jobs Act. The proposal clarifies the tax reporting and data collection obligations of crypto exchanges, payment processors, and BTC mining operations.
A new tax form, the 1099-DA, has been rolled out for these parties to streamline the process. By giving miners their own tax form, the Treasury Department insulated them from more unexpected requirements.
However, U.S. lawmakers’ focus on energy consumption for miners and the need for data transparency sets a bar for forward-looking mining operations and puts the onus on them to collaborate with regulators and future-proof their own regulatory fates.
Mark Zalan, founder and CEO of GoMining, a BTC mining company focused on transparency and compliance that reportes over $57 million in capitalization on its site, views the move by the Treasury with some optimism while monitoring regulatory investments in the U.S. and globally.
Zenger News spoke with Zalan about the Bitcoin regulatory landscape.
BZ: How important is the U.S. regulatory structure to Bitcoin miners?
MZ: GoMining firmly believes in the potential of Bitcoin. Operating with Bitcoin in the U.S. is smoother due to its classification as a commodity rather than a security. Our focus is on closely monitoring the regulatory landscape in the U.S. and globally. As we navigate these dynamics, we are committed to adhering to all relevant regulations in our operating regions, ensuring compliance as a key priority for our operations.
BZ: With the MiCA legislation now enacted, is the European Union suitable for mining operations?
MZ: Given their unified approach and understandable rules and regulations, the answer is yes. The introduction of a unified and structured regulatory framework for crypto assets under MiCA brings with it legal clarity and market integrity, creating a more secure environment for developers, service providers, and investors. However, suitability for mining operations would also depend on factors such as energy costs, access to resources, and other local considerations.
BZ: Does a bear market in crypto make it harder to operate profitably as a mining operation?
MZ: Minor fluctuations have a minimal impact on our business. When the Bitcoin market was in decline, we took some strategic actions. Leveraging wholesale prices, we acquired additional equipment while selling off older gear, making way for new energy-efficient devices. So we secured inexpensive electricity, allowing us to generate more computing power with the same energy input, thus stabilizing mining rewards.
BZ: Are decentralization and transparency key parts of building trust and security for users?
MZ: Indeed, our newly implemented infrastructure actively contributes to decentralization, significantly boosting trust within our system. Actually, this infrastructure introduces a distinct model that goes well beyond merely selling hash rate.
The concept is inspired by the liquid staking narrative, enabling users to participate in mining freely while leveraging tokens that represent their locked stake in the network validator. The liquid Bitcoin hash rate (LBH) functions in a similar manner: the physical mining equipment, along with its associated hash rate, operates within a data center, while the user possesses an NFT representing their ownership of the hash rate position. The LBH protocol contributes to the overall decentralization and trust in the system.
By tokenizing the Bitcoin hash rate as LBH tokens, GoMining enables users to participate in the PoW consensus in a transparent and decentralized manner, enhancing the trustworthiness of the mining process.
BZ: How can BTC mining operations win over people’s “hearts and minds” and avoid future regulatory hits?
MZ: To enhance their reputation and win favor within the blockchain community and beyond, mining operations should prioritize transparency and accountability, providing clear information about their activities and adhering to ethical practices. Cybersecurity measures, innovation, compliance, social responsibility, and strategic partnerships further contribute to building trust and establishing mining operations as reliable and responsible entities in the industry.
This latest decision from the U.S. Treasury Department is definitely some good news for the crypto mining industry. Of course, this is just one step forward – for the time being – that makes life easier for mining operations. Still, given the atmosphere of uncertainty created by the Security & Exchange Commission (SEC), there will be more hills to climb before crypto-related businesses can finally breathe easily and operate with some consistency.
Until then, GoMining is right to mind their transparency and reporting carefully. The winners in Web3 in 2023 will have to live down the actions of bad actors like FTX that came before them if we are to bring crypto into mainstream acceptance.
Produced in association with Benzinga