How Banning Crypto Mining Could Backfire for New York
New York Governor Kathy Hochul has signed into law a bill that will ban Bitcoin mining using unsustainable energy sources across the state.
The bill had been awaiting approval from the governor after passing in the New York state assembly in late April and the state senate in June.
The law prohibits proof-of-work mining that does not exclusively utilize sustainable energy sources to power its operations for two years. Those currently operating will be unable to renew their permits, nor will new participants be allowed to enter the market.
Proof-of-work is the consensus mechanism that confirms Bitcoin transactions and powers the network, in addition to generating new coins. However, the process requires advanced computing equipment and consumes copious amounts of electricity.
New York Meeting Its Energy Goals
The ban is an effort by New York to reach sustainability goals set out in legislation passed in 2019. The Climate Leadership and Community Protection Act requires the state to cut its greenhouse gas emission by 85% by 2050. The law includes a provision for a statewide study on the environmental impact of proof-of-work mining operations.
While the law hopes to assist in achieving these ambitious goals, its preclusion of hybrid solutions could ultimately prove counterproductive. Globally, sustainable energy accounts for roughly 60% of Bitcoin mining’s energy mix, a figure closer to 80% in New York.
Sustainable mining advocates fear that the mining ban will also drive away companies that already predominantly use renewable energy. One mining executive warned that many renewable-based miners would also stay away “due to the possibility of more regulatory creep.”
Additionally, former U.S. presidential candidate Andrew Yang said that mining operations have helped develop demand for renewable energy. “In my mind, a lot of this stuff is going to end up pushing activity to other places that might not achieve the goal of the policymakers,” he said.
Ripple Effects of the Ban
Mining proponents are also concerned about the ripple effects of the ban. In addition to suppressing the development of hybrid approaches, advocates say local economies will also take a hit.
Due to the sophistication of mining enterprises, they employ a host of local contractors including electricians, engineers, and construction workers.
New York also has a reputation as an influential state in terms of guiding legislative priorities. Mining advocates fear that the ban will likely motivate other states to introduce similar legislation.
In Sept, the California state legislature passed a bill that could require cryptocurrency service providers to register before operating there.
However, other players within the industry are less concerned over New York’s ban and its national implications. They point out that many other states offer significant incentives for miners to operate there. These include states such as Georgia, North Carolina, North Dakota, Wyoming and especially Texas.
Following China’s ban on cryptocurrency mining last year, many companies flocked to Texas, reestablishing the United States as the leading global contributor to Bitcoin mining.
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