To allay environmental worries about the energy-intensive practice, New York became the first state to temporarily block new cryptocurrency mining licenses at fossil fuel facilities.
The bitcoin industry had fought hard against the bill but was unable to overturn a successful campaign by a coalition of left-leaning lawmakers and environmental activists, which resulted in the legislation being approved by Gov. Kathy Hochul on Tuesday.
New York Gov. Kathy Hochul Enacts Law That Limits Crypto Mining
The law will place a two-year freeze on cryptocurrency mining businesses looking to obtain new licenses to convert some of the state’s oldest and dirtiest fossil fuel plants into digital mining operations. Additionally, it mandates that New York research the effect of the sector on the state’s efforts to cut greenhouse gas emissions.
After China tightened down on crypto-mining activities last year, other states implemented more benevolent rules toward the sector and offered tax incentives to attract the operations. New York made its decision just a few months afterward.
But it also comes at a time when the bitcoin industry is experiencing severe volatility and may be at a crossroads.
The FTX cryptocurrency exchange saw a quick and noticeable collapse earlier this month, which resulted in its filing for bankruptcy. Sam Bankman-Fried, the exchange’s principal, may face criminal charges in light of the collapse of what had been a dependable player in the new market. There are also more general concerns about the exchange’s future.
Bankman-Fried had been working to influence New York regulators to approve the operation of his exchange there. He also supported a super PAC that spent $1 million to support Hochul’s running mate, Antonio Delgado, in his primary contest earlier this year. He is a significant Democratic fundraiser.
The expenditure sparked criticism from Hochul’s political adversaries, who claimed it was proof that the business was trying to use its clout to persuade the governor to veto the mining moratorium.
Following successful lobbying efforts that included winemakers and other concerned business owners upstate, where many of the existing mining operations are based, the State Legislature, which is controlled by Democrats, passed the legislation in the waning hours of this year’s legislative session that ended in June.
‘Proof-of-Work’ Cryptocurrency Mining
The new law places a two-year moratorium on new and renewed air permits for fossil fuel power plants used for energy-intensive cryptocurrency mining, also known as proof of work mining, which refers to the computational process that records and secures transactions in bitcoin and other digital currencies.
The blockchain-based technology known as proof of work is what powers bitcoin and certain other cryptocurrencies. The Department of Environmental Conservation must evaluate how crypto mining affects the state’s capacity to achieve its climate goals, according to the law.
Environmentalists claimed that by allowing crypto mining businesses to operate their own natural gas-burning power plants, New York was undercutting those objectives.
Meanwhile, proponents of cryptocurrencies claimed that the law would hinder New York’s economic growth and singled out cryptocurrencies while failing to address other forms of fossil fuel use. Computers with specific hardware are needed for cryptocurrency mining, which uses a lot of electricity.
According to research based on data from the US Energy Information Administration, as of November 2018, the yearly electricity consumption of bitcoin was similar to that of Hong Kong in 2019. Some miners are trying to find ways to generate the necessary electricity with fewer fossil fuels.