On June 2, 2022, the New York Senate passed Bill S6486D (the bill), which would amend the state’s environmental conservation law and establish a two-year moratorium on certain cryptocurrency mining operations in the state. of New York. The bill passed the New York Assembly in early 2022 and is now awaiting the signing of Gov. Kathy Hochul. If signed, the bill would prohibit the issuance of permits for certain power-generating facilities that provide power for mining operations that use proof-of-work (PoW) authentication methods to validate blockchain transactions. The legislation would also require a comprehensive generic review of the environmental impact statement by the New York Department of Environmental Conservation in consultation with the state Department of Public Service.
What is Bitcoin Mining and PoW Authentication?
Bitcoin mining is an essential verification process for the bitcoin economy; is the process of creating new bitcoins by solving complex mathematical problems that verify transactions in cryptocurrency. PoW mining is one of the two most common mechanisms used by cryptocurrency miners to verify new transactions in the blockchain and make new tokens. Powerful computers connect to the bitcoin network and solve complex mathematical equations to confirm the legitimacy of bitcoin transactions. As payment for these calculations, miners receive new bitcoins as a financial incentive to keep the systems running. By applying PoW techniques, miners ensure the security of the blockchain by validating the accuracy of transactions, as there is no central authority to protect transaction information.
Key points of the bill
The bill would partially limit PoW mining operations in New York for two years. Key points of the bill include:
A two-year moratorium on approvals of any new or renewed permits for fossil fuel burning plants used to power PoW mining behind the counter, which only targets new operations.
A ban on the issuance of new air permits and the renewal of existing air permits, but would not affect current PoW mining operations whose air permits do not require review within the moratorium period.
A study of existing cryptocurrency mining operations and their potential environmental impact on the state by the environmental conservation department along with the public service department.
The bill would not apply to mining operations that use grid energy or use renewable energy.
The future of the bill and its impact
To date, Governor Hochul has not taken action on the bill and has indicated that a decision may not be made in the coming weeks. Blockchain industry leaders have expressed concerns about the potential economic impacts of the bill in New York State. If the governor signs the bill, New York would be the first state in the country to ban certain blockchain technology infrastructure.
Treatment of cryptocurrency mining in other states
If signed into law, the bill could have unintended consequences for New York’s industry, as innovators and entrepreneurs can focus on other states that have deregulated power grids and financial incentives. For example, some states are taking steps to encourage cryptocurrency mining as follows:
In May 2021, Kentucky passed a couple of bills that created tax incentives for cryptographic mining companies;1
In January 2022, in Illinois, legislation was proposed to amend a state law to extend incentives to cryptographic mining companies that settle in the state;2
In June 2021, Texas Gov. Abbott signed a bill3 that places virtual currency under Texas commercial law as a secure transaction, facilitating commercial transactions for cryptocurrency companies in Texas; e3
Georgia has also become an attractive state for cryptographic miners because it offers lower energy prices and large amounts of nuclear and solar energy.4
NOTES at the bottom of the page
1 The Kentucky State House of Representatives “House Bill 230” May 25, 2021, available at: HR 230, 21st Reg. Ses. (Ky. 2021); Kentucky State Senate “Senate Bill 255” May 25, 2021, available at: S. 255, 21st Reg. Ses. (Ky. 2021).
2 The Illinois House of Representatives “House Bill 5287” May 25, 2022, available at: HR 5287, 102nd Gen. Ass. (Il. 2022).
3 The Texas House of Representatives “House Bill 4474” June 15, 2021, available at: HR 4474, Reg. Ses. (Tex. 2022).
4 Josh Saul, “U.S. Bitcoin Miners See Georgia as the New U.S. Hot Spot,” Bloomberg U.S. Edition (February 7, 2022).
© 2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 174