New York could freeze crypto mining operations that run on fossil fuels
New York is the first state to try a crypto mining moratorium, but it likely won't be the last.
Cryptocurrency has captured the hearts and minds of an eclectic mix of individuals: entrepreneurs, artists, celebrities, and even criminals. But as crypto booms, so does its carbon footprint.
In a first-of-its-kind bill, New York lawmakers are proposing a moratorium on crypto mining, citing its enormous energy consumption as a threat to the state’s environmental and climate goals. The bill is currently making its way through the state legislature after passing the state Assembly’s Environmental Conservation Committee last month. If successful, it could set a precedent for similar regulatory actions at the federal level.
“This legislation coming from New York is a reflection that a lot of the [crypto] industry is here, but also that we take climate action very seriously and hope that leaders of other states and the nation will follow,” says Liz Moran, New York policy advocate at the environmental nonprofit Earthjustice.
New York is a leading region for crypto mining, especially upstate where companies can take advantage of large amounts of cheap hydropower. It already has some of the country’s most stringent rules around cryptocurrencies—mostly to protect against fraud—but legislators are becoming increasingly alarmed by the industry’s environmental impact as well.
The issue doesn’t directly stem from the buying, selling, or trading of coins, but the mining process used to validate transactions. Proof-of-work mining, the primary way of generating new coins and verifying monetary exchanges in the decentralized system, is especially energy-intensive and produces tons of e-waste. During this process, high-capacity computers that run on cheap energy, wherever and in whatever form that may be, compete against each other to solve complex equations and earn a reward in return.
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The state’s proposed moratorium calls for a two-year pause on issuing new air permits, and renewing existing permits, for fossil fuel-powered facilities that provide energy for proof-of-work mining operations.
“This is not an anti-tech piece of legislation because it doesn’t prevent the buying, selling, and trading of crypto at all,” says Anna Kelles, New York Assemblymember [D] and co-sponsor of the bill. “We could have a burgeoning crypto industry here without having [proof-of-work] crypto mining in the state.”
To put the issue in perspective, the annual power consumption of Bitcoin—which uses proof-of-work and is the first and most popular cryptocurrency—is comparable to that of the entire country of Thailand. There are much less energy-intensive ways to validate transactions, including the proof-of-stake mechanism that Ethereum is shifting to this summer. But proof-of-work still dominates the industry.
Some New Yorkers have been particularly concerned by cases where companies have fired up old fossil fuel plants for the purpose of mining crypto. One such case is the Greenidge Generation power plant, a former coal plant by Seneca Lake in Dresden, New York, that has been reopened by a private equity company to mine Bitcoin off of natural gas. The facility’s air permit is due for renewal—a decision that was due on March 31 which activists have been tracking closely—but New York’s Department of Environmental Conservation delayed its decision for another three months.
Since reopening, Greenidge now functions as a 24-hour Bitcoin-mining operation that produces 44 megawatts of electricity to run 15,300 computer servers. It also generates additional wattage for the state’s power grid that serves up to 20,000 homes and businesses in the region, according to its website. Kelles says there are about 30 other retired power plants in northern New York that could be targeted by crypto companies in the same way if a moratorium is not put in place.
New York’s proposed two-year moratorium specifically targets proof-of-work mining operations that are powered by fossil fuels, and also calls for an environmental review of the popular technology to see if it can align with the state’s climate goals. The state is aiming for a 40-percent reduction in greenhouse gas emissions by 2030, and an 85-percent reduction by 2050, as required by the 2019 Climate Leadership and Community Protection Act.
“The expansion of the crypto mining industry in the state can jeopardize these goals,” Moran says. “We’re concerned about the fossil fuel plants that they’re extending the lives of and also concerned about the need to significantly ramp up renewables to keep up with increasing energy consumption.”
Fossil fuel-powered crypto mining has gained a foothold in other states as well. In Pennsylvania, Stronghold Digital Mining converts coal waste into electricity to power its Bitcoin mining operation. In Montana, Marathon Digital Holding uses a coal-fired power plant to also mine Bitcoin.
It’s true that crypto mining operations also make use of renewables: Globally, an estimated 40 to 75 percent of Bitcoin miners rely on renewables as their main energy source. But that’s less of an immediate solution in the US, where wind, solar, hydro, geothermal, and biomass only account for about 20 percent of all electricity generation. If large amounts of the supply are going toward crypto mining, less will be available for other industries and public utilities.
At the federal level, President Joe Biden has ordered his administration to produce a report on the environmental costs of cryptocurrencies by September. But New York is the only state that has proposed any regulatory action on the crypto mining industry so far.
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Kelles emphasizes the moratorium’s “scalpel-precision focus” on crypto mining facilities that depend on fossil fuels. A similar bill made it through the state Senate last year, but failed in the Assembly due to opposition from the electrical workers union, which represents many Greenidge workers. Kelles says she has since worked through these issues in the Assembly and is optimistic that the moratorium will pass.
It’s unclear when New York legislators are scheduled to vote on the bill again. Once they do, it will have to pass the entire Assembly and State Senate before arriving at Governor Kathy Hochul’s desk, where, if signed, it would finally become law.