New York governor signs first-of-its-kind law cracking down on bitcoin mining — here’s everything that’s in it

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  • New York Gov. Cathy Hochul signed legislation on Tuesday banning some bitcoin mining operations that run on carbon-based power sources.
  • For the next two years, until the proof-of-work mining company uses 100% renewable energy, it will not be allowed to extend or renew permits, and new entrants will not be allowed to come online.

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New York Govt. Cathy Hochul signed legislation on Tuesday banning some Bitcoin Mining operations that run on carbon based power sources. For the next two years, until the proof-of-work mining company uses 100% renewable energy, it will not be allowed to extend or renew permits, and new entrants will not be allowed to come online.

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“This is the first case of its kind in the country,” Hochul said in a legal filing detailing his decision.

The governor said it was an important step for New York, as the state seeks to curb its carbon footprint by cracking down on mines that use electricity from fossil fuel-burning power plants. The legislation also comes as the crypto industry reels from the implications of Sam Bankman-Fried’s FTX, once one of the most popular and trusted names in the industry.

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New York’s mining law, which was passed by the state assembly in late April and the state senate in June, seeks a two-year moratorium on some cryptocurrency mining operations that use proof-of-work authentication to validate blockchain transactions. use methods. Proof-of-work mining, which requires sophisticated gear and lots of electricity, is used to create bitcoin, among other tokens.

Industry insiders told CNBC that this could have a domino effect across the US, which is currently at the forefront of the global bitcoin mining industry. Accounting for 38% of the world’s miners,

“The approval would set a dangerous precedent in determining who can exercise the power in the state of New York,” the Chamber of Digital Commerce wrote in a statement.

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It’s a sentiment echoed by Kevin Zhang of digital currency company Foundry.

Zhang, senior vice president of mining strategy at Foundry, said, “Not only is this a clear sign that New York is closed for business to bitcoin miners, it sets a dangerous precedent to restrict a particular industry from energy use. “

The net effect of this will undermine New York’s economy by forcing businesses to seek jobs elsewhere, according to Perian Boring of the Chamber of Digital Commerce.

“This is a significant blow to the state and will impact its future as a leader in technology and global financial services. More importantly, this decision will eliminate vital union jobs and protect people living in the Empire State.” will further disenfranchise financial access for many underbanked populations.” Boring previously told CNBC.

With regard to timing, the law became effective after the signature of the governor.

The irony of banning bitcoin mining

One section of the law includes conducting a statewide study of the environmental impact of proof-of-work mining operations on New York’s ability to reach aggressive climate goals set under the Climate Leadership and Community Protection Act, which requires New York to cap greenhouse gas emissions. is required. 85% reduction by 2050,

Boring told CNBC that the recent support for the ban is related to this mandate to transition to sustainable energy.

“Proof-of-work mining has the potential to lead the global transition to more sustainable energy,” Boring told CNBC’s Crypto World, pointing out the irony of the postponement. “The bitcoin mining industry is really leading the way in terms of compliance with that act.”

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

“The regulatory environment in New York will not only prevent their goal – carbon-based fuel proof of work mining – but also discourage new, renewable-based miners from doing business with the state because of the potential for more regulatory creep,” Institutional-Grade John Warren, CEO of bitcoin mining company gem mining,

A third of New Yorkers’ generation comes from renewable energy, according to the latest available Data from the US Energy Information Administration, New York counts its nuclear power plants toward its 100% carbon-free electricity goal and the state produces more hydroelectricity than any other state east of the Rocky Mountains.

The state also has a chilly climate, which means less energy is needed to cool the banks of computers used in crypto mining, as well as plenty of abandoned industrial infrastructure that is ripe for repurposing.

At the Bitcoin 2022 conference in Miami in April, former presidential candidate and New Yorker Andrew Yang told CNBC that when he talks to people in the industry, he’s found that mining operations help develop demand for renewable energy. can do.

“To my mind, a lot of these things are going to drive activity elsewhere, which may not achieve the goals of policy makers,” Yang said.

Some in the industry aren’t waiting for the ban to be made official by the state before taking action.

Earlier this year, data from digital currency company Foundry showed that New York’s share of the bitcoin mining network dropped from 20% to 10% in just a few months, as miners moved to more crypto-friendly jurisdictions in other parts of the country. started migrating towards

“Our customers are scared to invest in New York state,” said the foundry’s Zhang.

“Even of the Foundry’s $500 million capital deployment for mining equipment, less than 5% has gone to New York because of the unfriendly political landscape,” Zhang added.

domino effect

Now that the crypto mining moratorium has been signed into law by the governor, it could have a number of follow-up effects.

Beyond potentially stifling investments in more sustainable energy sources, industry advocates tell CNBC that each of these facilities has a significant economic impact with many local vendors including electricians, engineers and construction workers. The exodus of crypto miners could translate into jobs and tax dollars moving out of state, according to experts.

“There are many labor unions that are against this bill because it could have dire economic consequences,” Boring said. “Bitcoin mining operations are providing high-paying and high-grade, great jobs for local communities. For one of our members, they make an average salary of $80,000 a year.”

Hochul addressed some of these concerns in her statement Tuesday, noting that she recognized the importance of “creating economic opportunity in left-behind communities” and that she would “continue to invest in economic development projects that will shape the future.” creates jobs.” ,

As Boring points out, New York is a leader when it comes to state law, so there is also the potential for copycats across the country.

“Other blue states often follow New York state’s lead and this will give them an easy blueprint to replicate,” said Foundry’s Zhang.

“Sure, the network will be fine – it survived a nation-state attack from China last summer – but the implications for where the technology will scale and develop in the future are massive,” Zhang continued.

However, many others in the industry feel concerns have grown over the consequences of a mining ban in New York.

Several miners told CNBC that there are plenty of friendlier jurisdictions: Georgia, North Carolina, North Dakota, Texas and Wyoming have all become major mining destinations.

For example, Texas has crypto-friendly lawmakers, a deregulated power grid with real-time spot pricing, and access to significant excess renewable energy, as well as trapped or flared natural gas. The state’s regulatory friendliness towards miners also makes the industry very predictable, according to Alex Brammer of Luxor Mining, a cryptocurrency pool built for advanced miners.

“It is a very attractive environment for miners to invest large amounts of capital,” he said. “There are a huge number of land deals and power purchase agreements in various stages of negotiation.”

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