New York is now one step closer to becoming the first state to ban crypto mining that relies on carbon-based power sources.
The news comes after the state’s lawmakers passed a bill barring new entrants from establishing operations and pausing renewals for the already existing operating permits.
Approved by the New York State Assembly in April, the Senate Bill S6486D was passed in a 36-27 win following an early morning vote on Friday.
The bill is now headed to Governor Kathy Hochul to sign it into law or veto it.
#NYSenate Bill S6486D, sponsored by @senatorparker, passed (36-27, unofficial). Relates to establishing a moratorium on cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions:https://t.co/IagLZWiztp
— New York State Senate (@NYSenate) June 3, 2022
The bill calls for a two-year moratorium on fossil-fueled cryptocurrency mining operations that use proof-of-work (PoW), a particularly energy-hungry method to verify transactions on the blockchain.
It also essentially caps the electrical consumption of existing mining operations at their current levels.
The bill doesn’t stop any operations that run on renewable energy though, nor does it prevent the use of less energy-intensive alternatives to proof-of-work, such as proof-of-stake (PoS), used by many other cryptocurrencies to verify transactions.
The PoW algorithm underpins the industry’s two biggest cryptocurrencies—Bitcoin and Ethereum.
The latter, however, is expected to switch to a PoS consensus mechanism in Q3 this year.
Bitcoin mining environmental concerns
Plenty of debate around the bill is focused on the negative impact Bitcoin mining allegedly has on the environment.
According to Cambridge Bitcoin Electricity Consumption Index, if the Bitcoin network were a nation, it would rank 32nd in the world—right between Argentina and the Netherlands—in annual electricity use.
“There are an increasing number of cryptocurrency mining operations in New York that are mining cryptocurrencies that use proof-of-work consensus algorithm, such as Bitcoin and Ethereum,” reads the bill. “Some cryptocurrency mining companies purchased retired fossil fuel plants and began operating at a much higher rate than the plants did previously. Those companies are essentially operating as an electric generating facility that uses fossil fuels.”
Additionally, the bill mandates the creation of a "generic environmental impact statement" on PoW-based mining, which would see the New York State legislators “determine whether the growth of proof-of-work authentication cryptocurrency mining companies that operate their own electric generating facilities and produce energy by burning fossil fuels is incompatible with our greenhouse gas emission targets established in law.”
The bill, however, faces strong opposition from the representatives of the crypto industry fearing that if passed, it would deliver a blow to New York’s economy.
“This is a significant setback for the state and will stifle its future as a leader in technology and global financial services,” Perianne Boring, founder and president of the Chamber of Digital Commerce, told CNBC.
Greenidge Generation Holdings Inc., a New York-based Bitcoin mining outfit, also responded to the recent moratorium on June 3, saying "that the legislation will not apply to Greenidge's operations." It currently holds the necessary operating permits and filed a renewal application prior to the passing of the latest piece of legislation.
Still, the firm has earned the ire of many environmentalists and climate activists as its operations may threaten the state's aggressive climate goals.
An even more important aspect, according to Boring, is that signing the bill into law “will eliminate critical union jobs and further disenfranchise financial access to the many underbanked populations living in the Empire State.”