Bitcoin Mining Pause Passes Assembly
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 pause on crytocurrency mining operations that use 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 next-to-last day of the legislative session in a 35-28 vote with Sen. George Borrello, R-Sunset Bay, voting against. The legislation has not yet been delivered to Gov. 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 widely misunderstood digital currency grows in price — and with it popularity — the process of mining that is 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 Gov. Kathy Hochul to veto the legislation.
“Mayor Adams believes that 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 ban on crypto mining, which is the first in the nation, is unnecessarily stringent 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 legislators to craft responsible regulations that address the environmental issues associated with crypto mining, while continuing to encourage the growth of this burgeoning industry right here in New York.”
Assemblywoman Anna Kelles, D-Ithaca, sponsored A.7389 amid cricitism of a Bitcoin mine in the Finger Lakes. Greenidge Generation is a once-mothballed power plant that has been converted into a Bitcoin mine by a private equity firm. The plant 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 proof-of-work Bitcoin mining uses the same amount of energy each year as the entire country of Argentina, producing 30,700 metric tons of e-waste each year, comparable to the yearly IT equipment waste of the Netherlands. She said the industry could make it impossible for New York to meet its climate goals as 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, at the end of June, denied a Title V permit renewal for the station, saying the permit renewal application does not demonstrate compliance with the requirements of the Climate Leadership and Community Protection Act. Among the factors considered was the dramatic increase in greenhouse gas emissions from the facility since the passage of the Climate Act, driven by the change in the primary purpose of its operations. Rather than solely providing energy to the state’s electricity grid, the power plant now primarily provides energy behind-the-meter to support the demands of Greenidge’s energy-intensive proof of work cryptocurrency mining operations.
Greenidge Generation Holdings Inc. said in a news release the same day that the decision won’t affect operations any time soon because it can operate under its existing Title V air permit.
“We believe there is no credible legal basis whatsoever for a denial of this application because there is no actual threat to the state’s Climate Leadership and Community Protection Act (CLCPA) from our renewed permit,” company officials said in a news release. “This is a standard air permit renewal governing emissions levels for a facility operating in full compliance with its existing permit today. It is not, and cannot be transformed into, a politically charged ‘cryptocurrency permit’. Our Dresden facility represents a remarkably insignificant .2% of New York’s target (greenhouse gas) emissions level for 2030, and we have already reduced our GHG emissions at the facility by 70% when compared to the reference date of 1990 in the CLCPA. It is absurd for anyone to look at these facts and rationally claim that renewing this specific permit — for a facility that makes up a small fraction of the state’s electricity generation capacity — would impede New York’s long term climate goals. It simply would not.”
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 that are running, the faster a coin is mined. Each machine requires energy to run, plus more energy to run cooling technology.
Hochul is being pressured to declare a moratorium on the proof-of-work mining method and to deny an air quality permit Greenidge. A New York state judge recently ruled the project would not impact the air or water of nearby Seneca Lake while the DEC has given the plant an additional two months of operating time on its air permit renewals 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 looked for a new use for the former power plant since the repowering project was scrapped, with one potential use including a future as a data center.
Bitcoin was was created in 2009 as a new way of paying for things that would not be subject to central banks or government oversight. While it has yet to widely catch on as a method of payment, it has seen its popularity as a speculative investment surge despite volatility that can cause its price to swing wildly. In March 2020, one Bitcoin was worth just over $5,000. That surged 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 through which transactions are verified and then recorded on what’s known as the blockchain. Computers connected to the Bitcoin network race to solve complex mathematical calculations that verify the transactions, with the winner earning newly minted Bitcoins as a reward. Currently, when a machine solves the puzzle, its owner is rewarded with 6.25 Bitcoins — worth about $260,000 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 a regular home computer, but the technology was designed so problems become harder to solve as more miners work on them. Those mining today use specialized machines that have no monitors 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 the effort and puzzles are made more difficult.
Goodell argued proof-of-work crytocurrency mining should be allowed if the refired power plants can meet New York’s stringent environmental guidelines.
“Unfortunately, by the time the Public Service Commission had aprpoved (the NRG project) and all the regulatory burdens had been met, the plant could no longer proceed,” Goodell said. “As a result, Western New York now is powered by a dirty coal plant in Pennsylvania. We talk about how we should stop any new permittting for any business that generates its own power in complaince with every one of the environmental standards that New York state has for a two-year period while all the peopel who would benefit from that are not employed. And we know that during that two-year period those companies will locate somewhere else and instead of using power that meets our high standard, will use power from somebody else. In the meantime my residents and your residents will be deprived of that opportunity for a high-paying job. That’s why I’m voting against this.”