On April 26, the State of New York put itself at the forefront of the regulatory struggle with crypto, as its Assembly voted for a two-year moratorium on crypto mining operations that use energy generated by fossil-fuel power plants. Depending on how one looks at it, this development could either signal a new alarming legislative trend or a trigger that would accelerate the digital asset industry’s movement toward a more sustainable path.
Moratorium with further evaluation
The lower chamber of the NY state legislature, the Assembly, passed a bill that would put a two-year hold on any new mining operations using the proof-of-work (PoW) consensus mechanism, as well as on the renewal of existing permits.
The bill, S6486D/A7389C, is marketed by its sponsors as a necessary act of compliance with the 2019 Climate Leadership and Community Protection Act and its goal to reduce greenhouse gas emissions by 40% by 2030. The bill also mandates a “generic environmental impact statement” to be made by the Department of Environmental Conservation (DEC), which should evaluate the energy consumption and greenhouse gas emissions of PoW miners and their impact on public health.
Next up for the bill is a vote in the upper chamber, the State Senate, after which, if approved, it would go to Governor Kathy Hochul, who can either veto it or sign it into law.
The advocacy group Blockchain Association believes that the “anti-technology” bill can still be sunk in the Senate. The heated debate in the Assembly lasted for three hours, and the vote ended up far from unanimous: 95 in favor, 52 against.
A state affair
The passage of the bill triggered an alarm from the crypto community. The Crypto Council for Innovation shared a concern that the initiative could put innovation on the back burner. Kyle, Schneps, director of public policy of Foundry, underlined that the initiative is singling out only one industry out of many operating on fossil fuels in the state, and the decentralized finance (DeFi) Education Fund emphasized legislators’ refusal to acknowledge the benefits of the industry.
The sponsor of the bill, environmental and housing rights activist Anna Kelles dismissed these arguments in a Twitter discussion with the head of policy of Blockchain Association Jake Chervinsky. She pointed out that the bill is “extremely narrow in scope” and will only pertain to “large-scale crypto mining” in power plants that use fossil-based energy sources. Moreover, the moratorium will apply only to mining operations at decommissioned power plants with the single aim of preventing the large-scale relaunch of such plants that could be incentivized by crypto mining profitability. By her estimate, there are 49 such facilities in the State of New York.
As John Belizaire, CEO of green data center developer Soluna Computing, noted to Gist Vile that the moratorium will certainly “have a cooling effect” on crypto mining in the state. He believes the state is taking a “prudent action” to study the issue of environmental effects as the growth of the industry has raised concerns about whether it is prolonging the life of legacy fuels rich with carbon:
“We’d encourage the state to participate in open dialogue with forward-looking companies to learn how the crypto mining industry could accelerate New York’s renewable energy development.”
John Warren, CEO of GEM Mining — which claims its 32,000 miners to be 97% carbon neutral — commented to Gist Vile that the passage of this bill reveals that the New York legislature is “dominated by radical and fringe elements” who are “ignorant to a new and innovative sector of finance and technology.” Warren said:
“It is no wonder why so many citizens and businesses are fleeing New York in order to pursue great opportunities in common sense business-friendly states. As a graduate of New York University and someone who loves New York, it is painful to see the state implement policies that mirror China and Russia.”
The future is green
The experts tend to agree on the possible effects of the bill beyond the boundaries of New York State. Warren is convinced that the issue represents a unique case of “a radical outlier” and hence will have little effect on the United States’ role as the global leader in cryptocurrency mining:
“We’ve recently seen the opposite as many legislators have openly encouraged crypto operations in their states and even gone so far as to enact legislation in favor of crypto. Take Georgia, for example.”
Belizaire also found it hard to name other states with similarly hostile policies toward miners. He brought up the example of North Dakota as a state that saw the job creation potential of crypto mining and chose to partner with the industry:
“The NY ban seems to send a unilaterally negative message even before a conversation takes place. Unfortunately, this emboldens the narrative that the PoW protocol is bad for the planet.”
Regardless of the vote’s outcome, the New York moratorium is unlikely a case of a single state’s allergy to crypto mining. Coming from an environmental activism background, Kelles repeatedly highlighted that her concern is for the possible influence on New York State’s environment, not the crypto industry at large. It resembles a larger discussion about PoW mining that is happening on both national and international levels.
As Steve Wright, former general manager of Chelan County — Washington’s public utility district — explained at the congressional hearing in January 2022, miners’ interest in dormant fossil fuel facilities is driven by a simple market mechanism, which means there’s no rational reason for them to stop exploring such possibilities.
In that sense, the environmental push from the New York State legislators is an instance of a larger discussion that will inevitably persist around crypto mining and fossil fuels. While the New York bill doesn’t contain a single word about using renewable energy in mining, it could, in fact, incentivize the usage of green energy — Warren, who doesn’t perceive this measure as proper, still admitted that such a possibility exists.
“I think the moratorium will have mining companies give a second thought to using fossil fuels to power their operations. New York’s mission is clear: It’s all in on renewables. PoW crypto mining needs to get on the bus.”
Crypto mining, he believes, could even become a “special ingredient” of the larger green energy shift.