New York's bitcoin mining companies are increasingly considering abandoning their aspirations in what was once a promised land as the state's legislature considers a bill to ban new mining projects that use carbon-based energy sources pending a review of the industry's environmental impact.
“All cryptocurrency companies have a permanent hold on starting businesses in New York due to the political and regulatory ambiguity. If the bill were to pass, New York would become a permanent afterthought for the industry,” said Kyle Schneps, director of public policy at Foundry, one of the largest miners in the U.S., which is based in Rochester, N.Y. Foundry is owned by CoinDesk’s parent company, Digital Currency Group.
Foundry’s planned expansions in the state “will be curtailed along with hiring," Schneps said.
The bill, which passed to the state Senate in late April, calls for a moratorium on proof-of-work mining powered by nonrenewable sources, the type used in the Bitcoin network, in the state while its environmental impact is assessed.
Most crypto mining companies are staying away from the state because of authorities’ seemingly negative stance toward the industry, said Whit Gibbs, CEO of Compass Mining, a marketplace that matches miners with investors around the world.
Didar Bekbauov, co-founder of Kazakhstan-based miner Xive.io, who wants to expand operations into the U.S., told CoinDesk that he is leaning toward Texas because of favorable regulation and the availability of cheap electricity.
Prices are going up
Regulatory uncertainty, including the bill, is one reason why mining firms are less likely to move to New York, one executive from a local mining hosting firm told CoinDesk. Increases in energy prices are another reason. The executive attributed the uptick in electricity rates to global macro events such as the conflict in Ukraine as well as the growing cost of complying with renewable energy mandates in New York. The executive asked not to be identified, citing fear of retribution from environmental advocates and local officials.
This bill sends a “clear message to the crypto industry that New York is closed for business,” Schneps said. It “sets a dangerous precedent” and is a case of “government overreach” in that it limits a new industry’s right to energy, thus dooming the industry to failure, he said.
While the bill targets only mining operations that use fossil fuels, those that use renewable energy are wondering if they are next, John Olsen, who leads New York policy at advocacy group the Blockchain Association, told CoinDesk. The original language of the bill called for a moratorium on all types of mining, he said.
“Any kind of moratorium in statute is problematic because it can always be expanded or extended,” Olsen said.
Miners that Valkyrie Investments has spoken to think that “passing such regulations would likely cause them to reconsider New York going forward,” said Steven McClurg, the asset management firm’s chief investment officer. But “as the situation stands now,” renewable energy-powered mines don’t have “much reason” to move elsewhere, he said.
Read more: Can Crypto Miners Make the World Greener?
Coinmint, which operates a bitcoin mine with 435 megawatts of power capacity at a former aluminum smelter in Massena, N.Y., refused to comment on the bill specifically. But CEO David Fogel said its New York subsidiary operates “in an environmentally responsible way by using renewable hydroelectric power."
New York’s flip flop
Investments in mining in New York predate the exodus of miners from China, and the state is now at the epicenter of a debate about how to regulate miners in the U.S.
The state is rich in hydroelectric power; 80% of the electricity produced by the New York Power Authority (NYPA) comes from hydro, Alex Chiaravalle, associate media relations specialist at NYPA, told CoinDesk via email on Thursday. But NYPA generates only a quarter of the state's energy, according to its website. New York also boasts some of the cheapest electricity prices for businesses in the northeastern U.S.
Environmental concerns have followed the crypto miners, with one mine in particular the target of environmentalists’ ire: the Greenidge mine near Seneca Lake in upstate New York. It’s a 1937 coal power plant that was converted into a natural gas facility in 2014 and now houses 19,400 bitcoin mining rigs, with plans to add another 29,800 machines by the end of the year.
Environmentalists claim the mine is polluting the lake and jeopardizes the state’s carbon emissions goals. They have asked authorities and the government to deny renewal of the plant’s air pollution permits. The New York State Department of Environmental Conservation put off a decision on the issue until June 30, just two days after the primaries are scheduled to be held to nominate candidates for governor, while the state Supreme Court denied a preliminary injunction that would have stopped the mine’s operations before a decision is made.
In December of last year, Massachusetts Sen. Elizabeth Warren, a Democrat, asked the company to provide information about its carbon footprint, saying that “mining operations at Greenidge and other plants raise concerns about their impacts on the global environment, on local ecosystems and on consumer electricity costs.” Another letter to six miners around the U.S. followed a month later.
UPDATE (May 19, 3:00 p.m. UTC): Clarifies New York electricity generation figures.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.