Members of the House Local Government Committee tried to wrap their heads around cryptocurrency during a hearing Tuesday morning.
With the popularity of cryptocurrency growing in recent years, lawmakers on the committee found themselves at a loss for ways to address the emerging industry.
A bill, sponsored by Rep. Phil Christofanelli, R-St. Peters, would create a basic regulatory framework for cryptocurrencies, such as Bitcoin, in Missouri. The bill proved controversial, drawing criticism from some lawmakers and lobbyists for limiting the government’s ability to regulate industries.
Throughout much of the hearing, representatives from both sides of the aisle struggled to understand cryptocurrency and needed detailed background information from witnesses for clarification.
Christofanelli modeled the bill after a similar bill passed in Wyoming. The bill will primarily prevent local municipalities from passing laws that are explicitly aimed at the cryptocurrency industry.
“(The bill) says we can’t let the Public Service Commission charge a special rate just for crypto mining. They should be treated like any other player in the market,” Christofanelli said.
Coinbase, the largest cryptocurrency exchange in the United States, describes mining as “the process that Bitcoin and several other cryptocurrencies use to generate new coins and verify new transactions.” A virtual ledger is used to document transactions, which any computer with enough processing power can access, according to the information page on their website.
Computers connected to the network, known as the blockchain, confirm new transactions and are awarded currency, such as Bitcoin, in exchange. This currency can be bought and traded by consumers as a stock or investment.
“Cryptomining is a new and evolving field,” said Christofanelli. “There’s a huge amount of economic activity going on in this space. … The entire network has to agree on the amount of crypto so it can’t be fraudulently reproduced. That’s what makes it remarkably secure and almost impervious to fraud. .”
Michael Berg, a representative of the Missouri Sierra Club testified against the bill for that reason, citing concerns that it could limit the power of local governments and drain the power grid.
“(Crypto mining) takes a huge amount of energy because you have different miners competing to solve mathematical puzzles and … it creates a lot of pollution in this state. … If you look at cryptocurrency mining in the world, if Bitcoin was a country, it would rank in the top 30 countries for energy use,” Berg said.
Rep. Joe Adams, a Democrat from University City, also took issue with the bill on environmental grounds.
“They’re using an excessive amount of electricity, which is taking the power off the grid, (it’s) denying mom and pushing their air conditioners,” Adams said. Rep. Bridget Walsh Moore, D-St. Louis, shared his concerns.
Adams also categorically questioned the validity of cryptocurrency, saying it “does not exist”, like real currency. Christofanelli defended the bill, saying the decentralized nature of cryptocurrencies makes them difficult to regulate.
Despite his push to protect the industry in Missouri, Christofanelli said he still doesn’t own any cryptocurrency of his own.
“Cryptocurrency, like any investment, comes with a number of risks. I don’t own it because I don’t understand it well enough to invest in it,” Christofanelli said.
Christofanelli assured the committee that they had all been briefed by members of the cryptocurrency sector, something Adams and Moore objected to. Both representatives said they had not been visited by any members of the cryptocurrency industry.
Dennis Porter, CEO and founder of the Satoshi Action Fund, testified in favor of the bill, providing insight to the committee about how cryptocurrency works. Satoshi Action Fund is registered as a 501(c)4 non-profit organization (sometimes called a “dark money” or social welfare organization). The organization, Porter said, took its name from Satoshi Nakamoto, the founder of Bitcoin.
“We are seeing increasing brownouts and blackouts as the cost of energy increases for ratepayers in this and other states,” Porter said.
Porter said facilities that “mine” cryptocurrency will be uniquely equipped to solve problems like these, because mining computers can be shut down on demand, without disruption to the larger network.
“Missouri can rely on Bitcoin miners for a reliable response during high demand or emergencies, allowing your state to avoid building expensive, and often carbon-intensive, infrastructure,” Porter said.
Christofanelli said he would speak with Adams further to see about stricter regulations regarding taxation before moving the bill forward.
