The New York State Senate is debating legislation that would impose a two-year moratorium on some proof-of-work crypto mining operations.
The cryptocurrency industry has prepared to fight what critics call “bad policy” that could affect more than just miners, causing a chilling effect across the entire industry in New York. Opponents of the bill will hold a rally on the steps of the State Capitol in Albany on Monday.
Assemblywoman Anna Kelles, a Democrat from upstate New York who also sponsored this year’s version, introduced a similar bill last year. Though the previous bill was approved by the Senate, it was defeated in the Assembly after stiff opposition from the International Brotherhood of Electrical Workers (IBEW).
The scope of this year’s bill is much narrower than that of its failed predecessor, which would have imposed a three-year moratorium on all crypto mining in the state. The most recent bill would only apply to new permits for proof-of-work mining operations in former power plants where the primary source of power is derived from fossil fuels or permit renewals where the applicants seek to expand their facilities beyond their current sizes.
Existing operations, including Greenidge Generation, as well as all other mining operations that use the state’s cheap hydroelectricity, would be exempt.
This, however, has not alleviated concerns in the cryptocurrency industry. Lobbyists and industry leaders have taken to social media to protest the bill, claiming that it lays the groundwork for future legislation that will crush the state’s mining industry and possibly the entire industry.
They are also concerned about the message that the legislation, whether passed or not, sends to the crypto industry and its investors in New York.
Industry impact
Despite strict regulation and high taxes, New York has emerged as the crypto industry’s U.S. hub. Many major cryptocurrency companies have their headquarters in New York, including Gemini, Paxos, and OpenSea.
The mining industry has taken notice of New York state’s abundant cheap industrial energy – prices as low as 1.9 cents per kilowatt-hour in some cities, compared to the national average of 7.3 cents – Miners have established themselves in former industrial towns in New York’s North Country and Finger Lakes regions, sometimes taking over decommissioned coal-fired power plants and converting them into gas-powered crypto mining operations.
The Blockchain Association’s New York state lead, John Olsen, told CoinDesk that a mining moratorium could be an “existential threat” to the state’s crypto industry, which he said is already burdened with regulatory obstacles, including the BitLicense.
A two-year mining ban sends a negative message to the blockchain industry, crypto companies, and Web 3 companies, Olsen said. As more states consider the future and how blockchain might play a role, New York is saying, ‘You’re not welcome here.’
Olsen told CoinDesk that he is concerned that the bill unfairly targets the crypto industry while leaving other electricity-intensive industries, such as the cannabis industry, unaffected.
It bothers me that a bill like this is directly targeting one industry. New York could use all the help it can get in terms of not only creating jobs and keeping people in the state but also developing new technologies and moving the state forward, Olsen said. In previous years, we’ve seen a lot of anti-tech rhetoric and legislation… [Crypto] companies will simply think, ‘You know, it’s not worth it here in New York,’ he predicted.
Olsen’s sentiments were echoed by Steve McClurg, a chief investment officer of crypto-focused financial services firm Valkyrie Investments.
This ruling may have unintended consequences for New York, McClurg said in a statement to CoinDesk. As a result of this legislation, we believe innovators and entrepreneurs will continue to flee New York, continuing an exodus that began during the pandemic to more welcoming states such as Florida, Texas, Wyoming, and Tennessee.
Foundry, a digital asset mining and staking company with operations across the United States (Foundry is a subsidiary of Digital Currency Group, the parent company of CoinDesk), is one of those who have suggested that a New York moratorium could be a flight risk. The company’s headquarters are in Rochester, and it employs over 100 people.
On Monday, Foundry CEO Mike Colyer took to Twitter to criticize the bill, claiming that the push to ban Bitcoin mining is working… Our customers are afraid to invest in New York…thank you for suffocating the high-tech industry.
The Foundry Twitter account was even blunter, tweeting, A moratorium on bitcoin mining will take NY out of the game as our industry thrives elsewhere, generating jobs and tax dollars in more welcoming states.
Environmental angle
The expansion of proof-of-work mining in New York, particularly operations reliant on fossil fuels like Greenidge Generation, has alarmed environmentalists.
The bill not only calls for a ban on new permits for fossil-fuel-powered proof-of-work mining operations, but it also calls for a study of the environmental impact of PoW mining.
Many in the cryptocurrency industry, however, have pointed out that the bill’s proposed moratorium would not stop environmentally intensive mining; rather, it would shift it to states with less stringent environmental protections, such as Texas.
I think a mining man in the name of climate protection and environmental justice is a little deceptive, simply because these companies can go elsewhere, Olsen said. You’re just sending jobs and industries outside of your state.
It’s not like there’s a giant dome over New York state that isn’t affected by pollution from other states, Newhall said.
There will be no national proof-of-work ban, Newhall added. If one state decides to do that unilaterally, it will lose jobs, but pollution will increase elsewhere.
