Ban on Crypto Mining Makes New York a Potential Model for Other States

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The Washington Post via Getty Images

New York’s two-year ban on new proof-of-work cryptocurrency mining is likely to have only a small direct effect on the power-hungry industry that is shrinking anyway, but the influence of states Empire elsewhere may be a longer term problem.

I think a big issue here is that other states could use this moratorium and in turn enact similar laws locally, says Brendon Sedo, head of partnerships at CoreDAO, which operates a blockchain that runs on a combination of elements. proof-of-work and proof-of-stake, the two main systems by which information is added.

Sedo argues that New York has a lot of sway, because laws passed in Albany are sometimes replicated in other states. This can be seen in New York’s BitLicense, which allows businesses to conduct business in virtual currency in New York and which California lawmakers tried to copy before Governor Gavin Newsom vetoed it.

While one US state has yet to follow New York’s lead, the Canadian province of Manitoba imposed an 18-month moratorium on new crypto mining operations last month, just days after the enactment of the moratorium on November 22.

The Finger Lakes region has helped New York become one of the biggest states for bitcoin mining thanks to its processing power, accounting for about 10% of the US total at the end of last year, according to a study. from the University of Cambridge.

As Rust Belt manufacturing declined, beginning in the 1950s, it left behind underutilized and abandoned power plants and factories in upstate New York, convenient sites for crypto miners. But proof-of-work mining, which requires participants to solve mathematical equations in ways that prevent anyone from messing with the system, is being opposed by environmental groups as industrialized nations strive to cut carbon dioxide emissions. carbon to fight climate change.

This nation’s first law should set the standard for every other state where crypto miners arrive, extract resources and wreak havoc, says Liz Moran, the New York political lawyer at Earthjustice, a public interest environmental law. non-profit. organization.

The two-year ban is not absolute. It does not affect existing businesses and does not apply to miners whose energy is not derived from fossil fuels. But new mining operations will be banned and licenses will not be renewed.

This bill will create the break we need in the current trend of buying old power plants in New York for corporate profits and allow us to properly assess the impact of this industry on our climate goals before it It’s not too late, says Anna Kelles, a nutritionist and Democrat in the state Assembly, whose district spans parts of Cortland County and all of Tompkins, including the college town of Ithaca. .

Kelles sponsored the bill to focus on the environmental impacts of crypto mining.

To the south, New York City Mayor Eric Adams, also a Democrat, has pledged to make the state a crypto hub. Adams pledged to meet with lawmakers to reach a compromise on digital assets. Adams took his first three paychecks in bitcoin, despite the market downturn, to make that point.

If the mayor can’t strike a deal, it looks like proof-of-work miners, primarily bitcoin since ether switched to proof-of-stake in September, will have no choice but to flee to more hospitable places.

Other states have taken a somewhat different approach to bitcoin mining and are encouraging it rather than trying to eliminate it, says Andrew Webber, founder and CEO of Digital Power Optimization, a service provider that designs, builds and manages vertically integrated bitcoin mining operations. on behalf of the energy sector. Sales tax exemptions and other incentives are used by places like Ohio, Wyoming, Kentucky, Texas and others to attract more mining activity, as it is a cost-effective and flexible charging that can really help stabilize energy networks.

Riot BlockchainRIOT, a leading crypto miner, has already ditched upstate New York for Texas, moving its operations to Rockdale, about 50 miles northeast of Austin, in July from Massena. just across the St. Lawrence River from Canada.

These measures could potentially stifle financial innovation in New York, while benefiting conservative states such as Georgia, Texas and Kentucky, the US bitcoin mining leaders in 2021, according to the Cambridge report.

I don’t think a two-year period of thoughtful review should really be seen as anything other than the state, energy regulators and politicians preparing for what comes next, Webber says. It’s not yet positive or negative, he adds, but we have to see what emerges.

On the one hand, Webber argues that the two years could be a chance for policymakers to understand the costs and benefits of the activity while allowing the state to carry out mining deliberately. On the other hand, he thinks they might issue a permanent ban, which might be a bad move.

We agree that analyzing and addressing carbon footprint is important, but it needs to be done thoughtfully, says Webber. That said, no one seems to care about using energy to keep lights on at Yankees games or to make ties. Why is this particular use of energy so reprehensible?

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