Here’s what’s in New York’s new bitcoin mining ban

Following a morning vote in Albany on Friday, New York lawmakers passed a bill to ban new bitcoin mining operations. The measure is now being addressed to Governor Kathy Hochul, who could sign 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 Digital Chamber of Commerce. Industry experts also tell CNBC that it could have a domino effect across the US.

The New York Bill, which was previously passed by the State Assembly in late April before it was addressed to the State Senate, calls for a two-year moratorium on certain cryptocurrency mining operations that use working test authentication methods to validate blockchain transactions. Job proof mining, which requires sophisticated equipment and a lot of electricity, is used to create bitcoins. Ethereum is switching to a less energy-intensive process, but will still use this method for at least a few more months.

The impetus for a vote in the eleventh hour came when the leadership of the state capital managed to turn around some of the senators who were undecided.

Lawmakers who support the legislation say they are looking to curb the state’s carbon footprint by cracking down on electricity-fired mines that burn fossil fuels. If approved – for two years, unless a proven mining company uses 100% renewable energy, permits would not be allowed to be extended or renewed, and new entrants will not be able to go online.

The net effect of this, according to Boring, would be to weaken New York’s economy by forcing companies to seek employment 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 impede financial access to the many underbanked populations that they live in the Empire State, “Boring told CNBC.

It’s a sentiment echoed by Galaxy Digital’s Amando Fabiano, who says “New York is setting a bad precedent that other states could follow.”

As for the timetable, the law would come into force as soon as the governor signed it.

The irony of banning bitcoin mining

A section of the bill involves conducting a state study on the environmental impact of labor testing mining operations on New York’s ability to meet the aggressive climate goals set under the Climate Leadership and Community Protection Act, which requires reduce New York’s greenhouse gas emissions. by 85% by 2050.

Boring tells CNBC that the recent wave of support for this year’s proposed ban has a lot to do with this mandate to transition to sustainable energy.

“Job-proof mining has the potential to lead the global transition to more sustainable energy,” Boring told CNBC’s Crypto World, noting the irony of the moratorium. “The bitcoin mining industry is really a leader in enforcing that law.”

The global energy mix of the global bitcoin mining industry is estimated to be just under 60% today, and the Digital Chamber of Commerce has found that the sustainable electricity mix is ​​closer to 80% for its mining members in New York State. .

“New York’s regulatory environment will not only stop its goal, testing carbon-based fuels from working mining, but it will also discourage new renewable-based miners from doing business with the state due to the possibility of more regulatory fluency. “. said John Warren, CEO of institutional-grade bitcoin mining company GEM Mining.

One-third of the generation in New York State comes from renewable energy sources, according to the latest available data from the U.S. Energy Information Administration. New York counts its nuclear power plants on its 100% carbon-free electricity target and the state produces more hydroelectric power 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 banks of computers used in cryptographic mining, as well as a large amount of abandoned industrial infrastructure that is ripe for reuse.

In a conversation at the Bitcoin 2022 conference in Miami in April, former New York presidential candidate Andrew Yang told CNBC that when he talks to people in the industry, he found that mining operations can help develop demand for a renewable energy source.

“In my mind, many of these things will end up driving activity to other places that may not reach the goal of policymakers,” Yang said.

Some in the industry are not waiting for the state to make the ban official before taking action.

Digital currency company Foundry’s data show that New York’s share of the bitcoin mining network has dropped from 20% to 10% in a matter of months as miners have begun migrating to more cryptocurrency-friendly jurisdictions in other parts of the country. .

“Our clients are afraid to invest in New York State,” said Kevin Zhang of Foundry.

“Despite Foundry’s $ 500 million deployment for mining equipment, less than 5% went to New York due to the hostile political landscape,” Zhang continued.

The domino effect

If the governor signs the moratorium on cryptographic mining, it could have a number of side effects.

In addition to stifling investment in more sustainable energy sources, industry advocates tell CNBC that each of these facilities has a significant economic impact with many local vendors made up of electricians, engineers and construction workers. An exodus of cryptographic miners, experts say, could translate into jobs and tax dollars moving out of state.

“There are a lot of unions that are against this bill because it could have serious economic consequences,” Boring said. “Bitcoin mining operations are providing excellent, high-level jobs for local communities. One of our members, his average salary is $ 80,000 a year.”

As Boring points out, New York is a leader in state legislation, so there is also the potential for an imitation phenomenon to spread across the country.

“Other blue states often follow the example of New York State and this would give them an easy model to replicate,” said Zhang, senior vice president of Foundry Mining Strategy.

“Of course, the network will be fine, it survived an attack by the nation-state of China last summer, but the implications for where the technology will be scaled and developed in the future are huge,” Zhang continued.

However, many others in the industry think that concerns about the consequences of a mining moratorium in New York are exaggerated.

Veteran bitcoins miners like Core Scientific co-founder Darin Feinstein say the industry already knows that New York is generally hostile to the crypto mining business.

“There’s no reason to go into a region that doesn’t want you,” Feinstein said. “Bitcoin miners are really a data center business, and the data center must be located in jurisdictions that want to have data centers within their borders … If you’re going to ignore that, then you have to deal with the consequences of doing business in a region that doesn’t want your business “.

Feinstein and other miners point out that there are many more friendly jurisdictions: Georgia, North Carolina, North Dakota, Texas, and Wyoming have become major mining destinations.

Texas, for example, has legislators that support cryptography, a deregulated power grid with real-time spot prices, and access to significant excess renewable energy, as well as stranded or burned natural gas. According to Alex Brammer of Luxor Mining, a cryptocurrency group built for advanced miners, state regulatory compatibility with miners also makes the industry very predictable.

“It’s a very attractive environment for miners to deploy large amounts of capital,” he said. “The large number of land and energy purchase agreements that are in various stages of negotiation is huge.”

A national mandate on mining

Meanwhile, the Biden Administration is formulating its own policy aimed at bitcoin mining, with the aim of mitigating energy consumption and emissions.

The White House Office of Science and Technology Policy is examining the connections between distributed logging technology and energy transitions, the potential for these technologies to impede or advance efforts to address climate change at home and abroad, and the impacts these technologies have on the environment. according to Dr. Costa Samaras, who is the chief deputy director of energy.

The effort is one of the results of the president’s executive order issued in March.

Samaras tells CNBC that the White House is specifically examining the role these technologies can play in accounting for greenhouse gas emissions, as well as supporting the construction of a clean power grid.

They are also “taking a look at the implications for energy policy, including how cryptocurrencies can affect network management and reliability.”

It is unclear whether these recommendations, which are scheduled for September, will culminate in the federal Mining Test Work Act. For now, the states are calling.

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