New York Governor Kathy Hochul signed a bill imposing a two-year moratorium on certain types of cryptocurrency mining, citing concerns about its energy use and impact on climate change.
In a memo, she says the moratorium specifically targets mining operations that “are operated through electric generating facilities that use a carbon-based fuel.”
Many cryptocurrencies like Bitcoin use a proof-of-work algorithm that relies purely on computing power to process transactions. Politicians and environmental activists have expressed concern have expressed concern about the amount of power that proof-of-work mining uses.
Others, like Ethereum, switched to a proof-of-stake algorithm based on the numbers of coins like ether (ETH) that participants can stake. This requires users to lock their ether for a certain amount of time. If they join a staking pool, they may be able to receive tokens like “wrapped” or “staked” ether that serve as a stand-in that can be traded like normal.
Other New York Lawmakers Criticize the Move
Lawmakers like State Senator Jeremy Cooney opposed the new state law, saying that it hurt New York’s ability to support innovation.
“While I understand the environmental considerations and energy concerns raised by some, I worry technology sector moratoriums send an inaccurate message that New York isn’t a welcome home for innovators,” Cooney said in a statement.
He co-sponsored a bill to create a comprehensive study of the impacts of cryptocurrency mining in New York. He says the study will be a better move than a two-year moratorium.
Cryptocurrency Miners Seek Out Cheap Energy Sources
One challenge in enforcing this involves the idea that owners of mining rigs may not know whether their power comes from a “carbon-based fuel” or other sources like hydro or solar unless they generate the power themselves. This may especially be true for independent miners that aren’t part of a dedicated mining firm and are ill-equipped to track where their electricity comes from.
Mining groups like the Bitcoin Mining Council pushed back, saying that more than half of the power used to mine Bitcoin comes from renewable sources. Galaxy Digital published a study showing that the worldwide financial industry uses far more power than Bitcoin does.
Historically, Bitcoin miners have sought out inexpensive sources of power, including hydropower. In northern Italy, hydropower producers have spun up bitcoin mining operations in a bid to sustain their operations. The owners of a New York-based hydroelectric plant say they can make more money mining bitcoin than they can by selling the electricity to the grid.
Some United States-based miners have moved to rural parts of Texas in a bid to save on electricity costs. Texas has had some issues with its power grid in 2021, but is still seen as a state with less expensive power that is also friendlier toward crypto mining.
In the below video, Bloomberg proposed that Bitcoin could help with climate goals by using “stranded” energy that no one else is using.
The Texan power grid manager, Electric Reliability Council of Texas (ERCOT), also offers subsidies to bitcoin mining firms that turn off their mining rigs during peak hours. Several U.S. Senators, mostly Democrats, sent a letter to ERCOT questioning the wisdom of offering the subsidies.
Kathy Hochul said of New York’s new two-year moratorium on crypto mining, “I will ensure that New York continues to be the center of financial innovation, while also taking important steps to prioritize the protection of our environment.”
However, she was not necessarily believed in an environment where U.S. owners of mining rigs can move to other states that are friendlier toward crypto mining and more than half of Bitcoin’s energy use comes from renewable energy sources.