On June 2, 2022, the New York Senate passed Senate Bill S6486D (the bill), which would amend the state’s Environmental Conservation Act and establish a two-year moratorium on certain cryptocurrency mining operations in New York State. The bill passed the New York Assembly earlier in 2022 and now awaits Governor Kathy Hochul’s signature. If signed into law, the bill will prohibit the issuance of permits for certain power generation facilities that supply power to mining operations that use proof-of-work (PoW) authentication methods to validate transactions of the blockchain. The legislation would also require a comprehensive generic environmental impact assessment review by the New York Department of Environmental Conservation in consultation with the state Department of Public Service.
What is Bitcoin Mining and PoW Authentication?
Bitcoin mining is a verification process essential to the bitcoin economy; it is the process of creating new bitcoins by solving complex mathematical problems that verify transactions in the cryptocurrency. PoW mining is one of the two most common mechanisms used by cryptocurrency miners to verify new transactions on the blockchain and create new tokens. Powerful computers connect to the bitcoin network and solve complex mathematical equations to confirm the legitimacy of bitcoin transactions. In payment for these calculations, miners receive new bitcoins as a financial incentive to keep the systems running. By applying PoW techniques, miners ensure the security of the blockchain by validating the accuracy of transactions, as there is no central authority protecting transaction information.
Key points of the bill
The bill would partially restrict PoW mining operations in New York for two years. Key points of the bill include:
A two-year moratorium on approvals of any new or renewed permits for fossil fuel power plants used to power PoW mining behind the meter, which only targets new operations.
A ban on issuing new air permits and renewing existing air permits, but this would not affect ongoing PoW mining operations whose air permits do not require review during the moratorium period.
A study of existing cryptocurrency mining operations and their potential environmental impact in the state by the Department of Environmental Conservation in conjunction with the Department of Public Service.
The bill would not apply to mining operations that use grid power or use renewable energy.
The future of the bill and its impact
To date, Governor Hochul has not taken action on the bill and has indicated that a decision may not be made in the coming weeks. Blockchain industry leaders have expressed concerns about the potential economic impacts of the bill in New York State. If the governor signs the bill, New York would be the first state in the nation to ban certain blockchain technology infrastructure.
Treatment of Cryptocurrency Mining in Other States
If passed into law, the bill could have unintended consequences for industry in New York, as innovators and entrepreneurs could focus on other states that have deregulated power grids and financial incentives. For example, some states are taking steps to incentivize cryptocurrency mining as follows:
In May 2021, Kentucky passed a pair of bills creating tax incentives for crypto mining companies;1
In January 2022, legislation was proposed in Illinois to amend a state law to extend incentives to crypto mining companies setting up shop in the state;2
In June 2021, Texas Governor Abbott signed a bill3 that brings virtual currency under Texas commercial law as a secure transaction, making it easier for cryptocurrency companies in Texas to trade; and3
Georgia has also become an attractive state for crypto miners as it offers lower electricity prices and large amounts of nuclear and solar power.4
1 The Kentucky State House of Representatives “House Bill 230” May 25, 2021, available at: HR 230, 21st Reg. Sess. (Ky. 2021); The Kentucky State Senate “Senate Bill 255” May 25, 2021, available at: S. 255, 21st Reg. Sess. (K. 2021).
2 The Illinois House of Representatives “House Bill 5287” May 25, 2022, available at: HR 5287, 102nd Gen. Ass. (Fig. 2022).
3 The Texas House of Representatives “House Bill 4474” June 15, 2021, available at: HR 4474, Reg. Sess. (Tex. 2022).
4 Josh Saul, “US Bitcoin Miners See Georgia as New US Hot Spot”, Bloomberg US Edition (February 7, 2022).
©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 174
#York #Proposed #Moratorium #Cryptocurrency #Mining #Operations
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