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New York state partially bans cryptocurrency mining powered by fossil fuels

The law imposes a two-year moratorium on coal plants that house proof-of-work cryptocurrency mining to “balance economic development and climate goals”. It does not affect companies that have already filed paperwork to operate in New York

November 23, 2022 / 11:58 AM IST
New York is an attractive destination for crypto miners due to availability of unused infra from former coal power plants and manufacturing units (Representative Image: Akos Stiller/Bloomberg)

New York is an attractive destination for crypto miners due to availability of unused infra from former coal power plants and manufacturing units (Representative Image: Akos Stiller/Bloomberg)

New York has become the first state in the US to temporarily ban new permits for fossil fuel plants that power cryptocurrency mining, which is an energy-intensive exercise. Crypto mining is the process used in the transaction of cryptocurrencies such as bitcoin and ethereum.

Signed by re-elected New York Governor Kathy Hochul on November 22, the new law imposes a two-year moratorium on coal plants that house proof-of-work cryptocurrency mining and aims to “balance economic development and climate goals”, Politico reported.

It does not affect companies that have already filed paperwork to operate in New York.

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New York is an attractive destination for crypto miners due to the availability of unused infrastructure from former coal power plants and manufacturing units. But Hochul, who ran for office on climate change as an issue, is keen to steer the state towards a more environment-friendly path.

Democratic representative from Buffalo, NY, Hochul was re-elected on November 8. In the law’s memo, she said as the “first governor from upstate New York in nearly a century, I recognize the importance of creating economic opportunity in communities that have been left behind”.

“I am signing this legislation into law to build on New York’s nation-leading Climate Leadership and Community Protection Act, the most aggressive climate and clean energy law in the nation, while also continuing our steadfast efforts to support economic development and job creation in upstate New York,” she wrote.

Under the new law, the NY State Department of Environmental Conservation will also study the impact of crypto mining on the environment.

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The bill was “hotly debated” in Capitol with the crypto industry pushing for it to be stalled, while environmental groups encouraged its implementation. Though a “narrow step”, the law is expected to cause other states to follow suit and affect the already battered crypto industry.

Where does the bulk of mining happen?

As of May 2022, the US leads in terms of crypto mining, with close to 38 percent of blockchain computation being recorded in the region, Forbes reported citing the Cambridge Digital Assets Program (CDAP).

Despite the ban, CDAP found that China continues to be the second-largest hub powering over 20 percent of the global share, followed by Kazakhstan (13 percent), Canada (over 6 percent) and Russia (close to 5 percent). The rest is scattered across the globe.

Energy concerns, governments act

Increasingly, over the past couple of years, energy consumption has become the biggest sticking point in opposition to cryptocurrencies and particularly crypto mining.

According to a University of Cambridge index, bitcoin miners alone consume 130 Terra Watt-hours (TWh) of energy–equivalent to CO2 emissions by Jordon or Sri Lanka, TechCrunch said.

Also Read | Will disclosing proof of reserves bring back trust to the crypto ecosystem?

Concerns are such that in March 2021, reports emerged that India was working on one of the world's strictest policies against cryptocurrencies.

The law would have criminalised possession, issuance, mining, trading and transferring crypto assets. So far, no such legislation has been drawn up but India has imposed 30 percent capital gains tax on all crypto transactions.

Cryptocurrency remains a regulatory grey area and the Reserve Bank of India has on several occasions voiced its reservations about virtual currencies.

In May, China also banned mining and trading of cryptocurrencies.

In January 2022, Kosovo banned cryptocurrency mining to curb electricity consumption as the country faced the worst energy crisis in a decade due to production outages. Many young people in Kosovo are increasingly involved in crypto mining due to cheap power prices in the country.
Moneycontrol News
first published: Nov 23, 2022 11:13 am