New York crypto mining bill: Senator Anna Kelles interview

Bitcoin Offices in Istanbul, Turkey, May 11, 2022.

Umit Turhan Coskun / NurPhoto via Getty Images

New York State Assemblywoman Anna Kelles is tired of all the fear over the bill she wrote and sponsored to put a two-year moratorium on certain types of new cryptocurrency mines in the state. The fate of the measure, which was approved by the state Senate in the early hours of Friday, is in the hands of Gov. Kathy Hochul, who could sign or veto it.

“It’s important to understand that it’s not a ban,” Kelles said in a call to CNBC on Friday.

“It’s like a three-page bill. So it would be wonderful for people to read it, but it often ends up being an emotion-based interpretation.”

The legislation aims to curb the state’s carbon footprint by cracking down on cryptographic mines that meet very specific criteria.

On the one hand, they need to use the energy-intensive test authentication method to validate blockchain transactions. Second, they must extract electricity from power plants that burn fossil fuels. Within that mine subcategory, the measure only applies to those seeking to extend or renew permits, while new entrants will not be able to go online.

Job-proof mining, which requires sophisticated equipment and a lot of electricity, is virtually synonymous with bitcoin. Ethereum is switching to a less energy-intensive process, but will still use this method for at least a few more months.

“If there is a cryptocurrency mining operation, like there is in Syracuse, where there are thousands of cryptocurrency mining computer processors, and they are directly connected to the network: it is not a moratorium on that facility,” said Kelles, who told CNBC which does not own any cryptocurrency but is actively researching the sector.

In addition, it will not affect existing operations at power plants because it is not retroactive, nor will it affect “boutique or small-scale cryptocurrency miners who are doing, you know, four, five, ten, twenty computers in their basement.” she said.

Kelles says his bill is essentially just a big pause button, designed to stop the actions of a corner of the state’s crypto mining industry that runs on coal and natural gas-based power plants. These energy sources are interfering with the state’s aggressive climate laws that require it to be net neutral in its 2050 greenhouse gas emissions.

“It is very narrow and will not affect in any way the ability of anyone to buy, use, sell or invest in any cryptocurrency, including any cryptocurrency that is based on working test validation methods such as bitcoin,” he continued. Kelles.

Blowback of cryptographic blocks

The cryptographic mining industry has united to challenge the legislation.

Miners tell CNBC that while this bill is relatively narrow, they are concerned about the possibility of regulation occurring.

“A moratorium and a ban on how a miner gets energy, behind the counter in front of the grid, is not hospitable to miners,” said Fred Thiel of Marathon Digital.

“New York has a network congestion problem that is not affected at all by the power consumption behind the meter,” Thiel continued. “After all, this is sending a message to miners to stay away from New York, because these are just the first steps in what can become a wholesale ban on mining in the state.”

Miners make large capital investments that may take up to five years to provide a payback, in addition to return on investment. Thiel says no company is willing to risk investing in a state where after two years, or even earlier, they may be forced to close and move.

Kelles tells CNBC that the cryptocurrency miners challenging the bill are very similar to the oil and gas industry. She says both lines use, like, “If you do this, in the future, it will put a brake on free trade and free trade, and any regulation is bad.”

Nor does he care that cryptocurrencies leave New York because, like any business, their interest is in profits.

Small-scale miners compete in a low-margin industry where their only variable cost is usually energy, so they are encouraged to migrate to the world’s cheapest energy sources, which are also often renewable. New York is a cheap, renewable energy bastion, which is a big draw for the industry.

One-third of the generation in New York State comes from renewable energy, according to the latest available data from the U.S. Energy Information Administration, and the state produces more hydropower than any other state east of the Rocky Mountains.

“The oldest and largest cryptocurrency mining operation in the country is in New York State, and it’s completely hydroelectric. Hydroelectric power can’t be picked up or moved,” said Kelles, who also noted that hydroelectric power is the cheapest form of renewable energy. .

In addition, the state has a cold climate, which means less energy is needed to cool the banks of computers used in cryptographic mining. New York has a lot of abandoned industrial infrastructure that is also ripe for reuse.

“To say that miners can pick up and go out and go to any state and have access to that form of energy … I think it’s scary to say that,” Kelles said.

It’s like a three-page bill. So it would be wonderful for people to read it, but it often ends up being an interpretation, you know, based on emotions.

Anna Kelles


However, some data suggests that miners began leaving New York for more friendly political jurisdictions such as Wyoming and Texas last year, ahead of planned crackdown. Data from the digital currency company Foundry shows that New York’s share of the bitcoin mining network fell from 20% to 10% between October 2021 and the end of January.

“Our customers are afraid to invest in New York State,” said Kevin Zhang of Foundry Pool Cryptographic Mining.

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

Decide who regulates

The real tipping point of the legislation comes down to the question of who to regulate: working test cryptographic miners or power generators.

“It’s a two-year moratorium on the use of power plants,” Kelles said. “Some of my colleagues say, ‘You know, this is really a power plant bill.'”

That logic irritates some cryptocurrencies.

“If it was just a matter of refilling coal-fired power plants, it would be much easier, and fairer, to ban only the refilling of coal plants,” Thiel said. “Problem solved”.

Some of the most important names in bitcoin – including Jack Dorsey, Tom Lee, Nic Carter, and Michael Saylor, recently co-signed a letter to the Environmental Protection Agency arguing that congressional Democrats combine data centers with power generation facilities. The issue was completely separate from the New York moratorium bill, but the same reasoning applies.

The rebuttal letter says that data centers that contain “miners” are no different from data centers owned and operated by Amazon, Apple, Google, Meta, and Microsoft. According to the letter, each is just a building in which electricity feeds the computer equipment to operate. computing workloads.

“Regulating what data centers allow their computers would be a massive change in U.S. policy,” the letter reads.

Kelles says the New York bill does not distinguish cryptocurrencies from other large energy consumers, it is just that “there are no other energy consumers who are buying power plants.”

“It’s not about the industry, it’s about the use of power plants,” he said.

But that of Castle Island Venture Do Nic Carter the case that New York now “regulates the contents of the data center” and effectively “banned a kind of computing.”

“They are directly controlling what constitutes a valid use of power,” Carter wrote in a tweet.

Political decisions without emotion

Kelles says the key here is to make sure the state doesn’t make decisions on an emotional or political basis. She says that’s why the second half of the bill, which obliges the state government to assess the impact of the industry, is the most important part.

“Our scientific and environmental experts will collect data on the impact of industry on our ability to meet our CLCPA goals,” he said, referring to the Climate Leadership and Community Protection Act. The CLCPA is “among the most ambitious climate laws in the world” and is demanding that New York reduce greenhouse gas emissions from the entire economy by 40% by 2030 and no less than 85% by 2050 (from of 1990).

Kelles says the two-year moratorium on the purchase of fossil fuel-based power plants in New York will give scientists and experts in the Department of Environmental Conservation the time they need to complete a complete and transparent environmental impact statement.

“The charge for them, as stated in the bill, is to assess the impact of the cryptocurrency mining industry on our ability to achieve our CLCPA goals,” Kelles continued.

It is unclear whether the investigation will also examine ways job test miners can help with network resilience and encourage the construction of renewable infrastructure.

Texas, for example, served as a case study on how bitcoin mines can help stabilize power grids by ensuring that demand is always equal to supply.

Bitcoin miners have also improved the economy of renewable energy. When these energy buyers are located with renewable energy, it creates a financial incentive for construction and improves the central economy of renewable energy production, which has been full of volatility.

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