After an early morning vote in Albany on Friday, New York lawmakers passed a bill to ban some Bitcoin Mining operations that run on carbon-based energy sources. The action now heads to Governor Cathy Hochhol’s office, who can either sign it into law or veto it.
If Hochul signs the bill, it would make New York the first state in the country to ban blockchain technology infrastructure, according to Perianne Boring, founder and president of the Chamber of Digital Commerce. Industry insiders are also telling CNBC that it could have a domino effect across the United States, which is currently at the forefront of the global bitcoin mining industry, They represent 38% of the world’s miners.
The New York bill, which the state assembly previously passed in late April before heading to the Senate, calls for a two-year moratorium on some cryptocurrency mining operations 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 switching to a less energy-intensive process, but it will still use this method for At least for a few more months.
The push for the 11-hour vote came as leadership in the state capital managed to upset some previously reluctant senators.
Lawmakers who support the legislation say they are looking to reduce the state’s carbon footprint by cracking down on mines that use electricity from power plants that burn fossil fuels. If it passes – for two years, unless a proof-of-work mining company uses 100% renewable energy, they will not be allowed to expand or renew permits, and new entrants will not be allowed to go online.
The net effect of this, according to Burning, would be to weaken New York’s economy by forcing companies to take jobs elsewhere.
“This is a major setback for the state and will stifle its future as a leader in global technology and financial services. Most importantly, this decision will eliminate critical union jobs and further deny financial access to the many underbanked residents who live in the Empire State,” Boring says. for CNBC.
It’s a sentiment echoed by Galaxy Digital’s Amando Fabiano, who said “New York is setting a bad precedent that other countries can follow.”
As for the timing, the law will go into effect as soon as the governor signs it.
One section of the bill involves a statewide study of the environmental impact of mining operations to demonstrate work on New York’s ability to reach strict climate targets set under the Climate Leadership and Community Protection Act, which requires that New York’s greenhouse gas emissions be. 85% reduction by 2050.
Boring tells CNBC that the recent big support in favor of this year’s proposed ban 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, referring to the endowment paradox. “The bitcoin mining industry is actually a leader in terms of compliance with this law.”
Today it is estimated that the global bitcoin mining industry has a sustainable energy mix of just under 60%, and the Chamber of Digital Commerce has found a sustainable electricity mix to be closer to 80% for its miners in New York State.
“New York’s regulatory environment will not only stop its goal — demonstrating carbon-based fuels for mining in action — but will also likely discourage new miners and those involved in renewable energy from doing business with the state due to the potential for further regulatory creep,” said John Warren, CEO. For an Institutional Level Bitcoin Mining Company Gem mining.
A third of in-state generation in New York comes from renewables, according to the latest available Data from the US Energy Information Administration. New York is preparing its nuclear power plants towards its goal of 100% carbon-free electricity and the state Produce more hydroelectricity 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 computer banks used to mine cryptocurrency, as well as much of the abandoned industrial infrastructure that is ready for reuse.
Speaking at the Bitcoin 2022 conference in Miami in April, former presidential candidate and New Yorker Andrew Yang told CNBC that when he spoke to people in the industry, he found that mining operations can help develop demand for a renewable source of energy.
“In my opinion, a lot of these things will end up pushing activism elsewhere that may not achieve the goal of policymakers,” Yang said.
Some in the industry don’t wait for the state to issue an official ban before taking action.
Data from cryptocurrency firm Foundry shows that New York’s share of the bitcoin mining network fell from 20% to 10% within months, as miners began migrating to more crypto-compliant jurisdictions in other parts of the country.
“Our clients are afraid to invest in New York State,” said Kevin Zhang of Foundry.
“Even from foundry deployments of $500 million in capital for mining equipment, less than 5% went to New York due to the unfriendly political scene,” Zhang continued.
If a moratorium on cryptocurrency mining is signed into law by the governor, it could have a number of follow-up effects.
Besides potentially stifling investment in more sustainable energy sources, industry advocates tell CNBC that each of these facilities has a significant economic impact with its many local vendors consisting of electricians, engineers and construction workers. According to experts, the exodus of crypto miners could translate into jobs and tax dollars out of the country.
“There are many trade unions who are against the bill because it could have dire economic consequences,” Boring said. “Bitcoin mining provides high-paying, high-quality jobs to the local community. One of our members averages $80,000 per year.”
As Boring points out, New York is a leader when it comes to state legislation, so there’s also the potential for a counterfeit phenomenon spreading across the country.
“Other blue states often follow in New York’s footsteps, and that would give them an easy model to replicate,” said Chang, Foundry’s senior vice president of mining strategy.
“Sure, the network will be fine – it survived a nation-state attack from China last summer – but the implications for where the technology will expand and develop in the future are huge,” Zhang continued.
However, many in the industry believe that concerns about the implications of stopping mining in New York are overstated.
Veteran bitcoin miners such as Core Scientific co-founder Darren Feinstein say the industry already knows that New York is generally hostile to the crypto-mining business.
“There’s no reason to go into an area that doesn’t want you,” Feinstein said. “Bitcoin miners are really a data center business, and the data center needs to locate in jurisdictions that you want to have data centers within their borders… If you’re going to ignore that, you have to deal with the consequences of doing business in an area that you don’t want your business” .
Feinstein and other miners point out that there are a lot of friendlier jurisdictions out there: Georgia, North Carolina, North Dakota, Texas, and Wyoming are all becoming major mining destinations.
Texas, for example, has crypto-friendly lawmakers, an unregulated power grid with real-time pricing, and access to massively redundant renewable energy, as well as stranded or smoldering natural gas. The regulatory friendliness of the state towards miners also makes the industry predictable, according to Alex Brammer of Luxor Mining, a cryptocurrency pool designed for advanced miners.
“It’s a very attractive environment for miners to use large amounts of capital in,” he said. “The sheer number of land deals and power purchase agreements that are in various stages of negotiation is enormous.”
Meanwhile, the Biden administration is crafting its own policy targeting bitcoin mining — with the goal of mitigating energy consumption and emissions.
The White House Office of Science and Technology Policy is studying the links between distributed ledger technology and energy transitions, the potential for these technologies to impede or enhance efforts to address climate change at home and abroad, and the impacts of these technologies on the environment, according to Dr. Costa Samaras, assistant principal director of energy.
This effort is one of the accomplishments outlined in the President’s plan Executive order issued in March.
Samaras told CNBC that the White House is specifically studying the role these technologies might play in accounting for greenhouse gas emissions, as well as the potential to support building a clean electricity grid.
They are also “taking a look at the implications for energy policy, including how cryptocurrency affects network management and reliability.”
It’s unclear whether these recommendations, due in September, will culminate in federal law on extracting proof of work. For now, the states are the ones to decide.
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