Bitcoin mining regulation and its discontents*

Abstract

While cryptocurrency assets, and the complex web of trading platforms surrounding them, face regulatory uncertainly in the United States (US), European Union (EU), and elsewhere, more narrowly so does Bitcoin and other PoW mining. This chapter selectively reviews some of this broader context, as well as efforts to regulate mining. We emphasize the footloose nature of the Bitcoin mining industry and then review why we believe regulatory intervention is necessary. We provide an overview of the current regulatory and policy challenges concerning Bitcoin mining, with a focus on the US, including some state-level variation, since the US is currently the leading source of Bitcoin mining. We discuss relevant policy literature, including the range of potential regulatory instruments (e.g., outright bans of mining, taxes, and actions to move toward clean technologies). Underlining the importance of the broader context, a primary obstacle to proceeding with any regulation has been perceptions that it may unduly stifle industry innovation. The chapter includes discussion of philosophical considerations around attempting to regulate such a dispersed, footloose industry, whose ultimate use case remains highly uncertain. In concluding remarks, we endorse an incentive-based policy approach that encourages early consultation and collaboration with the industry.