What a Mining Moratorium Could Really Mean for New York’s Crypto Industry
The state's proposed two-year ban is inching closer to reality, and experts warn about its potentially chilling effect.
The New York state Senate is considering a bill that would place a two-year moratorium on some proof-of-work crypto mining operations.
The crypto industry has geared up to fight against what opponents describe as "bad policy" that could affect more than just miners, causing a chilling effect across the entire industry in New York. The bill’s opponents will rally in Albany on the Capitol’s steps on Monday.
A similar bill was proposed last year by Assemblywoman Anna Kelles, a Democrat from upstate New York who also sponsored this year’s version. Though the previous bill passed in the Senate, it died in the Assembly after facing stiff pushback from the International Brotherhood of Electrical Workers (IBEW).
This year’s bill is much narrower in scope than its failed predecessor, which would have imposed a three-year moratorium on all crypto mining in the state. The latest bill would apply only to new permits for proof-of-work mining operations in former power plants where the primary source of power is derived from fossil fuels or permit renewals where the applicants try to expand their facilities beyond their current sizes.
Existing operations, including Greenidge Generation, would be exempt, as would all other mining operations that tap into the state’s cheap hydroelectricity.
Also concerning, they assert, is the message that the legislation – whether it is passed or not – sends to the crypto industry and its investors in New York.
Despite tight regulation and high taxes, New York has emerged as the U.S. hub of the crypto industry. Many major crypto companies including Gemini, Paxos and OpenSea have their headquarters in New York.
New York state’s abundant cheap industrial energy – prices are as low as 1.9 cents per kilowatt hour in some cities, compared with the national average of 7.3 cents – has drawn the attention of the mining industry. Miners have set up shop in former industrial towns in New York’s North Country and Finger Lakes regions, sometimes taking over shuttered coal-fired power plants and turning them into gas-powered crypto mining operations.
John Olsen, New York state lead at crypto lobbying organization the Blockchain Association, told CoinDesk that a mining moratorium could be an “existential threat” to the state’s crypto industry, which he said is already overburdened with regulatory obstacles, including the BitLicense.
“A two-year mining ban sends a really bad message to the blockchain industry, to crypto companies, to Web 3 companies,” Olsen said. “As more and more states begin to think about the future and where blockchain plays a role, New York is saying ‘You’re not welcome here.’”
Olsen told CoinDesk that he is concerned the bill unfairly targets the crypto industry, while not preventing other electricity-intensive industries, including the cannabis industry, from causing the same amount of pollution.
“It’s troubling to me that a bill like this is directly targeting one specific industry. New York itself could use all the help it can get in generating jobs and keeping people here in the state, but also in developing new technologies and bringing the state forward,” Olsen said. “We’ve seen a lot of anti-tech rhetoric and legislation in previous years …[crypto] companies are just going to think ‘You know, it’s not worth it here in New York,’” he said.
Steve McClurg, chief investment officer of crypto-focused financial services firm Valkyrie Investments, echoed Olsen’s sentiments.
“This ruling could have unintended consequences for New York,” McClurg wrote in a statement provided to CoinDesk. “As a result of this legislation, we believe innovators and entrepreneurs will continue [to] leave New York in an exodus that started during the pandemic to more welcoming states like Florida, Texas, Wyoming and Tennessee.”
Foundry, a digital asset mining and staking company with operations across the U.S. (Foundry is a subsidiary of Digital Currency Group, the parent company of CoinDesk), is one of those that has insinuated it may be a flight risk in the event of a New York moratorium. The company has headquarters in Rochester and employs more than 100 people.
Foundry CEO Mike Colyer took to Twitter on Monday to lambast the bill, saying the “push to ban Bitcoin mining is working…our customers are scared to invest in NY...thanks for killing high-tech business.”
The Foundry Twitter account was even more blunt, with this tweet: “A moratorium on bitcoin mining will take NY out of the game as our industry flourishes elsewhere, generating jobs and tax dollars in other states that are more welcoming.”
The expansion of proof-of-work mining in New York – especially operations like Greenidge Generation that are reliant on fossil fuels – has been a source of concern for environmental groups.
In addition to calling for a ban on new permits for fossil-fuel powered proof-of-work mining operations, the bill also requires a study to be done on PoW mining’s environmental impact.
Many in the crypto industry, however, have pointed out that the moratorium proposed by the bill wouldn't stop environmentally intensive mining; rather it would move it to states like Texas with less stringent environmental protections.
“I think a mining ban in the name of climate protection and environmental justice is a bit disingenuous, simply because these companies can go elsewhere,” Olsen said. “You’re really just sending jobs and the industry outside of your own state.”
Graham Newhall, a communications specialist who works with the Blockchain Association on New York issues, said that by moving to places that don't have New York’s robust environmental protection laws, miners might end up causing more pollution.
“It’s not as if there is a giant dome over New York state that won’t be affected by pollution that’s happening in other states,” Newhall said.
“There’s no national proof-of-work ban coming,” Newhall added. “If one state decides to unilaterally do that on its own, it will lose the jobs but the pollution will still increase elsewhere."
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