Crypto Firms Have Not Delivered the ‘Promised Benefits’ of Legislator Backed Incentives, Says Nonprofit

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The Tech Transparency Project, or TTP, a research initiative of the United States-based nonprofit watchdog group Campaign for Accountability, has released a report claiming that crypto firms have “little in return” for state governments that offer financial incentives.

In a report released Thursday, the TTP said many crypto firms in certain US states have “reaped special benefits” for setting up operations, while not always bringing jobs, economic growth or tax benefits to residents. According to the group, crypto lobbyists worked on behalf of companies to get tax breaks and cuts in energy prices, while state governments “were faced with budget deficits, rising energy consumption and severe environmental damage.”

The research group cited policies dating back to 2017, in which state governments, including those of Nevada, Wyoming, Montana and Kentucky, passed pro-crypto legislation to incentivize businesses to set up shop. In Montana, for example, TTP-reported policymakers passed a law in 2017 that lowered property taxes on the data centers used to mine cryptocurrency. Mining companies stepped in, later to see residents complaining “about excessive noise, waste and power consumption” and asking for a moratorium.

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In Wyoming, where lawmakers have passed bills exempting crypto companies from real estate taxes and there is no state income tax for residents, the TTP reported that blockchain-based payments firm Ripple was not offering jobs in the state, while crypto exchange Kraken listed just one. In 2020, Wyoming Governor Mark Gordon said he was to consider “devastating but necessary” budget cuts for government departments, with lawmakers reportedly considering similar measures for K-12 education in 2021 — though the economic impact of the pandemic may also played a role.

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The group added:

“At the very least, the public should have a say in these crypto handouts. Particularly in states facing economic difficulties, the perception of innovation should not take precedence over the material benefit of the taxpayer.”

Related: Georgia Lawmakers Consider Tax Exemptions for Cryptominers in New Bill

Kentucky lawmakers voted to remove sales tax from electricity purchased by local crypto mining operators in 2021 and made mining companies eligible for state tax incentives aimed at clean energy companies. A report released in November 2021 by the Office of the State Budget Director estimated that these incentives cost the state about $11.6 million a year.

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“It is too early to say how much these measures, which came into effect on July 1, will actually cost the Kentuckians,” the TTP said. “But several state programs are already facing significant budget pressures, which could be exacerbated by cryptocurrency incentives. […] It is also unlikely that the tax incentives will create new jobs in Kentucky.”