New York Just Passed A Bitcoin Mining Ban – Here’s Everything In It

Following an early morning vote in Albany on Friday, New York lawmakers passed a bill banning new bitcoin mining operations. The measure is now heading to Governor Kathy Hochul’s office, who could sign it or veto it.

If Hochul signs the bill, it would make New York the first state in the nation to ban blockchain technology infrastructure, according to Perianne Boring, founder and president of the Chamber of Digital Commerce. Industry insiders also tell CNBC it could have a domino effect across the United States, which is currently at the forefront of the global bitcoin mining industry, accounting for 38% of the world’s miners.

The New York bill, which had already passed the State Assembly in late April before heading to the State Senate, calls for a two-year moratorium on certain crypto mining operations -currencies that use proof-of-work authentication methods to validate blockchain transactions. Proof-of-work mining, which requires sophisticated equipment and a lot of electricity, is used to create bitcoin. Ethereum is moving to a less energy-intensive process, but will still use this method for at least a few more months.

The push for an eleventh-hour vote came as leaders in the state capitol managed to unseat some of the previously undecided senators.

Lawmakers backing the legislation say they seek to reduce the state’s carbon footprint by cracking down on mines that use electricity from power plants that burn fossil fuels. If this passes – for two years, unless a proof-of-work mining company uses 100% renewable energy, it would not be allowed to extend or renew permits, and new entrants would not be allowed to log in.

The net effect of this, according to Boring, would be to weaken New York’s economy by forcing businesses to take jobs elsewhere.

“This is a significant setback for the state and will stifle its future as a leader in global technology and financial services. More importantly, this move will eliminate critical union jobs and further deprive financial access to many underbanked populations living in the Empire State,” Boring tells CNBC.

It’s a sentiment echoed by Galaxy Digital’s Amando Fabiano, who says “New York is setting a bad precedent that other states could follow.”

As for timing, the law would go into effect as soon as the governor signs it.

The irony of banning bitcoin mining

A section of the bill is to conduct a statewide study of the environmental impact of proof-of-work mining operations on New York’s ability to meet aggressive climate goals set under the Climate Leadership and Community Protection Act, which requires New York’s greenhouse gas emissions to be reduced. 85% by 2050.

Boring tells CNBC that the recent wave of support for the proposed ban this year has a lot to do with this mandate to transition to sustainable energy.

“Proof of work mining has the potential to lead the global transition to more sustainable energy,” Boring told CNBC’s Crypto World, noting the irony of the moratorium. “The bitcoin mining industry is actually leading in terms of compliance with this law.”

The sustainable energy mix of the global bitcoin mining industry is now estimated at just under 60%, and the Chamber of Digital Commerce has found that the sustainable energy mix is ​​closer to 80% for its members who mine in New York State.

“The regulatory environment in New York will not only halt their focus – carbon fuel-based mining – but will also likely discourage new renewable energy-based miners from doing business with the state due to the possibility of further regulatory drift,” said John Warren, CEO of institutional-grade bitcoin mining firm GEM Mining.

One-third of New York State’s generation comes from renewables, according to the latest available data from the US Energy Information Administration. New York is counting its nuclear plants toward its goal of 100% carbon-free electricity, and the state produces more hydroelectric power than any other state east of the Rocky Mountains.

The state also has a cold climate, which means less energy is needed to cool the banks of computers used in crypto mining, as well as a lot of abandoned industrial infrastructure that is ripe for re-use.

During a conversation at the Bitcoin 2022 conference in Miami in April, former presidential candidate and New Yorker Andrew Yang told CNBC that when speaking to people in the industry, he had discovered that mining operations could help develop demand for a renewable energy source.

“In my mind, a lot of these things are going to end up pushing activity to other places that might not hit the decision makers’ target,” Yang said.

Some in the industry are not waiting for the state to formalize the ban before taking action.

Data from digital currency firm Foundry shows New York’s share of the bitcoin mining network fell from 20% to 10% in months as miners began migrating to more crypto-friendly jurisdictions in other parts of the country.

“Our clients are afraid to invest in New York State,” said Kevin Zhang of Foundry.

“Even of Foundry’s deployments of $500 million in capital for mining equipment, less than 5% went to New York due to the hostile political landscape,” Zhang continued.

The domino effect

If the moratorium on crypto-mining is signed into law by the governor, it could have a number of follow-on effects.

Beyond the potentially stifling investments in more sustainable energy sources, industry advocates told CNBC that each of these facilities has a significant economic impact with many local suppliers made up of electricians, engineers and of construction workers. An exodus of crypto miners, experts say, could mean out-of-state jobs and taxes.

“Many unions are against this bill because it could have disastrous economic consequences,” Boring said. “Bitcoin mining operations provide high-paying, high-quality jobs to local communities. One of our members, their average salary is $80,000 a year.”

As Boring points out, New York is a leader in state legislation, so there is also a risk that a copycat phenomenon will spread across the country.

“Other blue states often follow New York’s lead and that would give them an easy model to replicate,” said Zhang, Foundry’s senior vice president of mining strategy.

“Of course, the network will be fine – it survived a nation-state attack from China last summer – but the implications for where the technology will evolve and grow in the future are huge” , Zhang continued.

However, many other industry players believe that concerns about the fallout from a New York mining moratorium are overblown.

Veteran bitcoin miners like Core Scientific co-founder Darin Feinstein say the industry already knows that New York is generally hostile to crypto-mining activity.

“There’s no reason to go to an area that doesn’t want you,” Feinstein said. “Bitcoin miners are very much a data center business, and the data center needs to go into jurisdictions that want to have data centers within their borders…If you want to ignore that, you face the consequences of conducting business in an area that does not want your business.”

Feinstein and other miners point out that there are many friendlier jurisdictions: Georgia, North Carolina, North Dakota, Texas and Wyoming have all become major mining destinations.

Texas, for example, has crypto-friendly lawmakers, a deregulated power grid with real-time spot pricing, and access to a large surplus of renewable energy, as well as stranded or flared natural gas. The state’s regulatory friendliness to miners also makes the industry very predictable, according to Alex Brammer of Luxor Mining, a cryptocurrency pool designed for advanced miners.

“It’s a very attractive environment for miners to deploy large amounts of capital in,” he said. “The number of land deals and power purchase agreements that are in various stages of negotiation is huge.”

A National Mandate on Mining

Meanwhile, the Biden administration is formulating its own policy targeting bitcoin mining – with the aim of reducing energy consumption and emissions.

The White House Office of Science and Technology Policy is examining the links between distributed ledger technology and energy transitions, the potential of these technologies to hinder or advance efforts to combat climate change at home and abroad. abroad, and the impacts of these technologies on the environment, according to Dr. Costa Samaras, who is the Senior Deputy Director for Energy.

The effort is one of the deliverables set out in the presidential decree issued in March.

Samaras told CNBC that the White House is specifically looking at the role these technologies could play in accounting for greenhouse gas emissions, as well as potentially supporting the construction of a clean power grid.

They also “examine implications for energy policy, including how cryptocurrencies can affect grid management and reliability.”

It is unclear whether these recommendations, which are expected in September, will result in federal proof-of-work mining legislation. For the moment, it is the States which decide.

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