US Mining Industry

Cryptocurrency mining in the US is showing dynamic growth, especially against the backdrop of the current ‘bull run’ — a bull market where most investors are buying cryptocurrency rather than selling it.

When Bitcoin first emerged, America became one of the key regions for cryptocurrency mining. This was made possible by a strong crypto community and a variety of energy sources: hydroelectric power plants, coal, nuclear power plants, as well as renewable energy sources such as solar and wind. Additionally, some states have low electricity costs, particularly Texas.

In the early stages, the market was driven by enthusiasts and small startups. Moreover, until 2021, China held the top spot in the world for hash rate, not the US. However, over time, mining in the USA has turned into a stable and even traditional business. The US is now the leader in this market. This is largely due to Beijing’s 2021 ban on cryptocurrency trading, which threatens digital currency traders with fines and even imprisonment. Various news sites reported that the cryptocurrency business in China went underground, and Chinese miners began to move en masse to the US. Today, analysts believe that mining cryptocurrency in the USA is successfully developing thanks to investments. Let’s take a closer look.

US Mining Industry

Company Overview

Let’s take a look at the largest US mining companies by market capitalization.

1. Marathon Digital Holdings

Market Capitalization: $5.31 billion

Founded: 2010

Headquarters: Florida

Operations: Mining farms in Texas, primarily using renewable energy sources. Specializes in Bitcoin mining.

2. CleanSpark

   Market Capitalization: $4.03 billion

   Founded: 1987

   Headquarters: Utah

   Operations: Mines Bitcoin and provides energy technology services. Owns data centers powered by low-carbon energy. Uses renewable sources like Marathon Digital Holdings.

3. Riot Blockchain

   Market Capitalization: $3.04 billion

   Founded: 2000

   Headquarters: Colorado

   Operations: First NASDAQ-listed investment company specializing in crypto mining enterprises. Has Bitcoin mining data centers in Texas and electrical distribution manufacturing in Colorado.

4. Core Scientific

   Market Capitalization: $1.84 billion

   Founded: 2017

   Headquarters: Texas

   Operations: Bitcoin miner providing hosting services for clients across seven data centers. Also sells equipment and offers solutions for the cryptocurrency industry.

   In 2022, Core Scientific filed for bankruptcy, but as of January 2024, it emerged from this process, reducing its debt to $571 million and converting equipment loans and notes into equity.

5. Bitfarms

   Market Capitalization: $1.14 billion

   Founded: 2017

   Operations: Engages in cryptocurrency mining in the US, Canada, Paraguay, and Argentina. Founded in Canada, it is the only public company in the cryptocurrency mining sector audited by a Big Four accounting firm.

   There are also other, smaller mining companies in the country. Many of them rent out equipment to tens of thousands of people.

Regulation

The legislative regulation of mining in the United States is still in the formative stages. Unlike in Russia, where anything not prohibited is allowed, the situation in the US is much more complex and frequently appears in the news.

The creation of a legal framework is still ongoing, but the American crypto market is already under pressure from government bodies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and others. The Federal Reserve (analogous to the Central Bank) also periodically raises concerns with banks working with cryptocurrency.

There have been serious consequences from such pressures. In 2020, the SEC accused blockchain company Ripple of trading unregistered securities. The price of the XRP token halved, and investors lost hundreds of millions of dollars. The company also faced reputational risks. According to information on their website, Ripple is convinced that the token does not exhibit any characteristics of a security. In 2023, Ripple’s official account stated that they would emerge victorious in this ongoing dispute.

Due to administrative pressure, giants like Bittrex and Coinbase might leave the American market, and Kraken has already closed all investment products for US residents. As a result, America could lose its status as a leading crypto jurisdiction. To prevent this, bills are being introduced in the Senate to regulate the industry, although they have not yet been passed.

Taxes

In the US, tax collection is regulated by the Internal Revenue Service (IRS). Americans are required to report all transactions made during the previous tax year. The standard deadline for filing tax documents in the US is April 15th each year, and this also applies to cryptocurrency reports.

Taxation depends on the investment period, profit size, electricity costs, or losses. If an American holds cryptocurrency for more than a year, it is considered a long-term investment. If the profit exceeds $41,676, the tax rate is 15%. For profits over $459,750, the rate is 20%.

Investments in cryptocurrency for less than a year are considered ordinary personal income. In this case, the profit is taxed at rates ranging from 10% to 37%, depending on the amount and even the taxpayer’s personal circumstances.

Electricity

According to specialists from the US Energy Information Administration, miners in the country annually spend between 0.6% and 2.3% of the nation’s total electricity consumption on cryptocurrency mining. This is equivalent to the consumption of the entire state of Utah, as reported recently in local news.

To mine 1 BTC, a miner in the US spends 862,635.55 kWh of electricity, which costs approximately $110,500. Before the Bitcoin halving, the cost of mining was half as much, at $52,100.

In 2024, the US has already spent 20,822.62 GWh of electricity, equivalent to $2.7 billion, on mining just one cryptocurrency – Bitcoin. This makes mining in the US less profitable.

F.A.Q.

How do they pay taxes for mining in the USA?

Income from cryptocurrency mining is considered taxable income. If an American sells or exchanges cryptocurrency, they must pay a capital gains tax on the difference between the purchase price and the sale price.

In Russia, this is a standard personal income tax rate, while in the US, it depends on income and even personal circumstances. See the table for details.

How to avoid large mining taxes in the USA?

In the US, it is possible to deduct expenses related to mining, including the cost of equipment, electricity, and internet. It’s important to meticulously document all expenses so they can be deducted from income when calculating taxes..

Additionally, holding mined cryptocurrency for more than a year can qualify you for lower long-term capital gains tax rates.

Why is the USA now one of the centers of cryptocurrencies?

The US leads in BTC mining, contributing 37.9% of the global hash rate. China is second with 21.1%, despite strict local regulations that drive much of its mining underground. Several factors contribute to the US’s leading position.

Rapid Popularity: Cryptocurrency quickly gained popularity in the US, leading to the establishment of major exchanges and investment funds. Investment Confidence: Companies are willing to invest in crypto startups and projects due to a well-developed financial system that provides access to capital.

Technological Encouragement: The US strongly encourages the development of new technologies, with institutions and research centers actively exploring cryptocurrency and blockchain topics. This results in a constant increase in publications and resources available, particularly in English.

Conclusion

The legal regulation of cryptocurrencies in the US is still evolving, and analysts often highlight the existing risks and uncertainties.