The state of New York is planning to pass a bill to ban new bitcoin mining operations in the state. But this is a move that some industry insiders fear could have an adverse effect across the U.S.
The bill, which is making its way through Albany, calls for a two-year moratorium on certain cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions.
Mining, which requires sophisticated gear and a whole lot of electricity, has virtually become synonymous with 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.
According to experts, the net effect of this, would be to weaken New York’s economy by forcing businesses to take jobs elsewhere.
They also believe 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, one expert Fabiano said, 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.
NY’s love-hate relationship with crypto
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.
Meanwhile, 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.
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.
The sustainable energy mix of the global bitcoin mining industry today is estimated to be just under 60%, and the Digital Chamber of Commerce has found that the sustainable electricity mix is closer to 80% for its members mining in the state of New York.
Some heads of bitcoin mining companies have also added their voice to the subject matter, saying:
“The regulatory environment in New York will not only halt their target – carbon-based fuel proof of work mining – but will also likely discourage new, renewable-based miners from doing business with the state due to the possibility of more regulatory creep”
Meanwhile, some people in the industry aren’t waiting for lawmakers to make a ban official before taking action.
Data from digital currency company Foundry shows that New York’s share of the bitcoin mining network dropped from 20% to 10% in a matter of months, as miners begin migrating to more crypto-friendly jurisdictions in other parts of the country.
Customers are being scared off from investing in New York. And if New York passes a crypto mining moratorium, it could have a number of follow-on effects.
There are many unions labor unions who are against this bill because it could have dire economic consequences. This is because Bitcoin mining operations are providing high-paying and high-grade, great jobs for local communities.
However, many others in the industry think concerns over the fallout of a mining moratorium in New York are overblown.
Veteran bitcoin miners like Core Scientific co-founder Darin Feinstein say the industry already knows New York is generally hostile to the crypto mining business.