While several states across the US are leaving no stone unturned to entice crypto mining companies to set up shop in their respective jurisdictions, New York lawmakers are moving in the opposite direction.
As the NY State Legislature enters the eleventh hour of its 2022 session, early morning voting in Albany on Friday passed a bill that would potentially impose a strict 2-year ban on all new crypto mining permits. The bill also intends to ban some existing mining operations that run on carbon-based power sources, primarily repurposing fossil-fuel burning plants.
After being passed by the Assembly in April, the bill hung in the Senate for weeks until it was unexpectedly brought back to life and passed on Friday morning just before the Senate adjourned. The Democrat-controlled state Senate is expected to take up the matter shortly before the bill arrives on Governor Cathy Hochul’s desk, which will determine its fate.
New York lawmakers who support the law have also given their reasons for the sudden move. He clarified that this is being done to curb New York’s carbon footprint by cracking down on mining companies, especially those employing non-renewable resources. Unless a proof-of-work (PoW) mining company can show proof that they are using 100% renewable energy, they will not be allowed to extend or renew their permits.
A draconian law or a well thought out move?
While top executives continue to support his decision, this unexpected move has drawn sharp criticism from the crypto community.
According to Narek Gevorgian, CEO and founder of CoinStats, “I am astonished that New York politicians will stand against proof-of-work mining in the same way as their European peers, but the New York bill is the epitome of virtue signaling. I understand that New York has taken a stand to reduce reliance on fossil fuels. aggressive targets have been outlined, but linking this matter to mining is short-sighted.”
Gevorgian insists, “Not only will this work make mining firms more reluctant to do business in New York, but it will also directly affect the state’s tax coffers. Miners are moving with their feet to friendly jurisdictions and voting, and the state has Already a lot of revenue has been lost by pursuing this strict regulation.
Following China’s dominance of crypto mining, New York has emerged as a major mining hub. This has led to the “revival” of dilapidated coal mines and a sharp increase in the use of low-cost natural gas, as miners experiment with alternatives to power energy-intensive mining rigs.
Mining companies across New York have closed former power plants due to inefficiency, carbon emissions and reduced electricity consumption. Restarting and re-installing these plants reduces the greenhouse gas emissions that the shutdowns achieved so far. As a result, NY’s progress in meeting its climate goals—at least the extent it’s legally obligated to meet—has been noticeably slow. In this context, the bill, if passed, could help NY get closer to achieving its climate goals, if not.
But it also has serious side effects.
Crypto industry leaders are not very supportive of the bill, mainly because they believe that if Governor Hochul signs it into law, it will affect regulations in other states and even at the federal level. . Meanwhile, miners expect the move by New York lawmakers to backfire as miners start moving to other states, leaving New York’s economy very vulnerable.
Vincent Hung, Head of Marketing Communications at ParallelChain Lab, explains, “New York State has not been a place where the mining sector is important. Even with China’s outright ban on mining last year, bitcoin’s hash rate recovered very quickly. The major impact anticipated from this potential ban is New York. The existing operations in the U.S. will be moved to other states, and this effect will remain in place even after the ban is lifted in 2 years.”
he adds, “The environmental cost of mining is a known problem, hence the popularization of proof-of-stake. Nevertheless, there is a noticeable variation in the energy consumption of many forms of proof-of-stake. Being sustainable is an ongoing process, Which means that the PoS protocol must conform to high standards of energy efficiency.”
The latest data from Foundry indicates that New York’s share of the cryptocurrency mining market has fallen from 20% to 10% since the bill was first issued in April. This happened as large mining companies began to move to more crypto-friendly jurisdictions in other parts of the US.
From the perspective of miners, New York provides the best conditions to mine cryptocurrencies using cheap power sources. NY produces more hydroelectric power than any other state east of the Rocky Mountains and generates about a third of its electricity from renewable sources. The chilly climate of the state makes it easy to cool the rigs employed in crypto mining. On top of that, there is considerable abandoned industrial infrastructure available for reuse.
Yes, New York includes the enthusiastic climate goals set by the Climate Leadership and Community Protection Act, which require cutting greenhouse gas emissions by 85% by 2050. That said, because most of NY’s power is generated from renewable energy, isn’t the idea of banning mining operations outright a bit extreme?
Instead, NY lawmakers should consider how Kenyan energy company KenGen is enticing miners to use its excess renewable energy. The company claims that 86% of its energy is generated from renewable sources, primarily from geothermal pockets scattered throughout the Great Rift Valley. New York is already generating one-third of its electricity from renewable energy. As such, it can create new laws that attract miners, not laws that repel them.
RSK’s head of strategy and co-founder Adrian Edelman at IOV Labs argues, “Bitcoin is an energy scavenger looking for the cheapest available resources such as hydro, geothermal and wind in remote locations away from large urban areas. For this reason, bitcoin mining is proving to be much cleaner than the industry standard. It also generates incentives to develop new renewable energy sources as it acts as a subsidy until the construction of distribution lines.Bitcoin is creating demand for green energy today until there is demand from cities which justifies higher prices to cover transmission costs.”
he explains, “Bitcoin mining ban will only prevent renewable-energy miners from operating in the state, while the best way to discourage carbon-based power sources is to subsidize green mining. Ultimately, if the bill is approved, it will only Mining will force businesses to take jobs in more bitcoin regulatory-friendly areas in the US or abroad. Last and foremost, New York’s bitcoin mining ban is extremely dangerous because it sets a precedent where governments intervene to tell society What are the cases in which energy is allowed to be used. If this trend continues, it can lead us to all kinds of dystopian situations.”
The far-reaching effects of this bill are yet to be seen. That said, if New York governor Hochul signs the bill into law, it could trigger a ripple effect that could affect mining activities across the US, prompting other crypto-friendly jurisdictions to follow suit. can inspire. Furthermore, the results will not be limited to mining companies only. This would potentially affect investments in sustainable energy resources, put local vendors (electricians, construction workers, IT workers, etc.) out of work, and even seriously “taxable out-of-state” income” figures as well.