New York is poised to implement a two-year moratorium on some Bitcoin mining operations.
The state Assembly passed A.7389C midway through the legislative session to create a two-year moratorium on cryptocurrency mining that uses proof-of-work authentication methods to validate transactions. The moratorium passed 91-56 with Assemblymen Andrew Goodell, R-Jamestown, and Joe Giglio, R-Gowanda, voting against the measure. The bill passed the state Senate on the penultimate day of the legislative session on a 35-28 vote with Sen. George Borrello, R-Sunset Bay, voting against. The legislation has not yet been submitted to Governor Kathy Hochul for her signature.
According to the Associated Press, access to cheap and reliable electricity is a key component of Bitcoin mining. Many economists and environmentalists have warned that as the still-much-misunderstood digital currency grows in price – and with it popularity – the process of mining central to its existence and value is becoming increasingly energy-intensive and potentially unsustainable.
According to the New York Post, New York City Mayor Eric Adams asked Governor Kathy Hochul to veto the legislation.
“Mayor Adams believes New York City must be at the forefront of the innovation economy, which includes cryptocurrency and web3, as we continue to chart our economic recovery,” Adams spokesman Jonan Allon said in a statement, according to the Post. “He is concerned that the state’s first-in-the-nation ban on crypto mining is unnecessarily strict and risks sacrificing our competitive edge at a time when we can least afford it. The administration is committed to working with the governor and state legislatures to craft responsible regulations that address environmental issues related to crypto mining while continuing to encourage the growth of this burgeoning industry here in New York.
Assemblywoman Anna Kelles, D-Ithaca, sponsored A.7389 amid criticism of a Bitcoin mine in the Finger Lakes. Greenidge Generation is a once-moth-powered power plant that has been turned into a Bitcoin mine by a private equity firm. The facility has created 48 new jobs and operates more than 17,000 Bitcoin mining machines with plans to expand to more than 32,500 machines. Globally, Kelles has said that proof-of-work Bitcoin mining uses the same amount of energy each year as the entire country of Argentina, and produces 30,700 tons of e-waste each year, compared to the annual IT equipment waste in the Netherlands. She said the industry could make it impossible for New York to meet its climate goals outlined in the Climate Leadership and Community Protection Act, which commits to an 85% reduction in greenhouse gases by 2050 and 100% zero-emission electricity by 2040.
The state DEC in late June denied a Title V permit renewal for the station, saying the permit renewal application did not demonstrate compliance with the requirements of the Climate Leadership and Community Protection Act. Among the factors assessed was the dramatic increase in greenhouse gas emissions from the plant since the adoption of the Climate Act, driven by the change in the main purpose of the operation. Instead of just supplying energy to the state’s power grid, the power plant now primarily supplies behind-the-meter energy to support the demands of Greenidge’s energy-intensive proof-of-work mining operations.
Greenidge Generation Holdings Inc. said in a news release the same day that the decision will not affect operations immediately because it can operate under its existing Title V air permit.
“We believe there is no credible legal basis whatsoever to deny this application because there is no actual threat to the state’s Climate Leadership and Community Protection Act (CLCPA) from our renewed permit,” say company officials in a press release. “This is a standard air permit renewal that controls the emission levels of a facility operating in full compliance with the existing permit today. It is not, and cannot be converted into, a politically charged ‘cryptocurrency permit.’ Our facility in Dresden represents a remarkably insignificant 0.2% of New York’s 2030 target (GHG) emissions level, and we have already reduced our GHG emissions at the facility by 70% compared to the 1990 reference date in the CLCPA. It is absurd for anyone to look at these facts and rationally argue that renewing this specific permit—for a facility that makes up a tiny fraction of the state’s power generation capacity—would impede New York’s long-term climate goals. It simply wouldn’t.”
Proof-of-work cryptocurrency mining, which Bitcoin uses, is an energy-intensive process that requires thousands of machines working 24 hours a day, seven days a week, to solve complex equations. The more machines running, the faster a coin is mined. Each machine requires energy to run, plus more energy to run cooling technology.
Hochul is pressured to declare a moratorium on the proof-of-work mining method and to deny an air quality permit to Greenidge. A New York state judge recently ruled that the project would not affect the air or water of nearby Seneca Lake, while the DEC has given the facility an additional two months of operating time on its air permit renewal while decisions are made.
Goodell compared the Greenidge situation to the repowering proposal at the former NRG power plant in Dunkirk. The plant was to be converted from a coal to a natural gas plant, but the project fell through. State and local officials have been looking for a new use for the former power plant since the repowering project was scrapped, with potential uses including a future as a data center.
Bitcoin was created in 2009 as a new way to pay for things that would not be subject to central banks or government oversight. Although it has yet to gain much attention as a payment method, it has seen its popularity as a speculative investment boost despite volatility that can cause its price to swing wildly. In March 2020, one Bitcoin was worth just over $5,000. It rose to a record of more than $67,000 in November 2021 before falling to just over $35,000 in January.
Central to Bitcoin’s technology is the process by which transactions are verified and then recorded on what is known as the blockchain. Computers connected to the Bitcoin network race to solve complex mathematical calculations that confirm the transactions, with the winner earning newly minted Bitcoins as a reward. Currently, when a machine solves the puzzle, the owner is rewarded with 6.25 Bitcoins – worth around $260,000 in total. The system is calibrated to release 6.25 Bitcoins every 10 minutes.
When Bitcoin was first invented, it was possible to solve the puzzles using an ordinary home computer, but the technology was designed so that problems become more difficult to solve as more miners work on them. Miners today use specialized machines that have no screens and look more like a high-tech fan than a traditional computer. The amount of energy used by computers to solve the puzzles grows as more computers join and the puzzles become more difficult.
Goodell argued proof-of-work cryptocurrency mining should be allowed if the decommissioned power plants can meet New York’s strict environmental guidelines.
“Unfortunately, once the Public Service Commission had approved (the NRG project) and all regulatory burdens were met, the plant could no longer continue,” Goodell said. “As a result, Western New York is now powered by a dirty coal plant in Pennsylvania. We’re talking about how we should stop any new permit for any business that generates its own power in complaint with all the environmental standards that New York State has for a two-year period, while all those who will benefit from it are not employed.. And we know that during that two-year period these companies will locate elsewhere and instead of using electricity that meets our high standard, they will use electricity from some others. Meanwhile, my residents and your residents will be deprived of that opportunity for a good-paying job. That’s why I’m voting against this.”
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