The state of New York wants to ban new bitcoin mining operations, a move that some industry insiders fear could have a domino effect across the U.S.
The bill, which is swiftly making its way through the state capitol in Albany, calls for a two-year moratorium on certain cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions. Proof-of-work mining, which requires sophisticated gear and a whole lot of electricity, is used to create bitcoin, though ethereum — at least for another few months — still uses this method to secure its network.
Lawmakers sponsoring the legislation say they are looking to curb the state’s carbon footprint by cracking down on mines that use electricity from power plants that burn fossil fuels. For two years, unless a proof-of-work mining company uses 100% renewable energy, it would not be allowed to expand or renew permits, and new entrants would not be allowed to come online.
The net effect of this, according to Galaxy Digital’s Head of Mining Amanda Fabiano, would be to weaken New York’s economy by forcing businesses to take jobs elsewhere.
“New York will be left behind, losing to other states at best, and at worst, other more progressive nations. New York is setting a bad precedent that other states could follow,” said Fabiano, echoing a concern held by many in the crypto industry.
At this point, the State Assembly has passed the bill, and it is now under consideration by the Democratic-controlled State Senate, which will soon vote on the measure. If it passes, it will land on the desk of Governor Kathy Hochul, who could sign it into law or veto it.
“If it passes, it would make New York the first state in the country to ban blockchain technology infrastructure,” explained Perianne Boring, founder and president of the Digital Chamber of Commerce.
In some ways, New York offers dream conditions to bitcoin miners.
Miners compete in a low-margin industry where the only variable cost is typically energy, so they have a strong economic incentive to migrate to the world’s cheapest sources of power – which also tend to be renewable. A third of New York’s in-state generation comes from renewables, according to the latest available data from the U.S. Energy Information Administration. New York counts its nuclear power plants toward its 100% carbon free electricity goal, and the state produces more hydroelectric power than any other state east of the Rocky Mountains.
The state also has a chilly climate, which means less energy is needed to cool down the banks of computers used in crypto mining, as well as a lot of abandoned industrial infrastructure that’s ripe for repurposing. Crypto mining company Coinmint, for example, operates a facility in a former Alcoa aluminum smelter in Massena, which taps into the area’s abundant wind power, plus the cheap electricity produced from the dams that line the St. Lawrence River. The Massena site, at 435 megawatts of transformer capacity, is billed as one of the largest bitcoin mining facilities in the U.S.
But not all operations run on renewables. Companies like Greenidge Generation, which operates its bitcoin mining facility in a former coal plant retrofitted for natural gas, have drawn the ire of some lawmakers who now want to stamp out the state’s crypto mining industry.
The northern border town of Plattsburgh temporarily enacted its own local ban on cryptocurrency mining operations in 2018, and just last year, politicians tried to shut down parts of the mining industry statewide. That move failed after a union representing electrical workers came out in defense of the mining industry.
This latest effort, however, appears to have real teeth.
One section of the bill currently under consideration in Albany involves conducting a statewide study of the environmental impact of proof-of-work mining operations on New York’s ability to reach aggressive climate goals set under the Climate Leadership and Community Protection Act, which requires New York’s greenhouse gas emissions be cut by 85% by 2050. Boring tells CNBC the recent swell of support in favor of this year’s proposed ban has a whole lot to do with this mandate to transition to sustainable energy.