Fight Looms Over New York’s Bid to Slow Crypto-Mining Boom

ALBANY, NY – Across the country, some states are trying to lure cryptocurrency mining companies to set up shop, offering tax incentives in hopes of creating jobs and expanding their foothold in the tech industry.

In New York, lawmakers are moving in a different direction: in the declining hours of its 2022 session, the state legislature unexpectedly passed a bill last week that would impose a two-year ban on new cryptocurrency mining permits, particularly on fossil-fuel burning. Plants that have been reused by some businesses to power energy-intensive activity.

The groundbreaking law, which would make New York the first state to implement such a moratorium, has the potential to influence regulations in other states or at the federal level.

The bill marks a significant defeat for the growing, deep-pocketed industry at the hands of left-leaning lawmakers, climate activists and the growing grass-root coalition of winemakers, who argued that there would be environmental costs for cryptocurrency mining in the future.

“Other blue states could potentially introduce legislation like this based on the efforts of the environmental lobby,” said John Olsen, chief representative in New York for the Blockchain Association, an industry group that opposed the moratorium. “It’s definitely a concern.”

However, it is not clear whether Gov. Kathy Hochul will sign the bill. And the cryptocurrency industry is expected to invest heavily in persuading her to reject the measure and influence other industry-friendly rules in Albany.

Ms. Hochul’s campaign has already received $ 40,000 from Cinmint’s chief executive Ashton Soniat, who has conducted a crypto-mining operation based on a former aluminum plant in Massena, NY, a small town northeast of Niagara Falls.

Ms. has received a very big political gift. The lieutenant governor of Hochul, Antonio Delgado, is facing two primary challenges this month. Super PAC, a major cryptocurrency exchange backed by the founder of FTX, has spent nearly $ 1 million on digital advertising over the past few weeks in support of its campaign, according to state filing.

Michael Levine, for Super PAC, said he was only focused on supporting candidates he believed would support epidemic preparedness measures. But those five ads running across the state are also Mr. Delgado’s work on climate change, infrastructure, abortion and schools.

According to state records, the company is paying મેન 12,000 per month to consulting firm Heinmann Stroeb to lobby the state government over cryptocurrency regulations. FTX founder Sam Bankman-Friday said in a statement that the company had applied for a trust charter to operate in New York and was in talks with regulators about its application.

The governor, a moderate Democrat, facing a June 28 primary election, is non-committed to whether he will sign the bill, prioritizing environmental activists and the party’s left. Ms. Hochul will probably not have to make a decision until December. 31.

“We will look at all the bills very closely,” Ms. Hochul said during a news conference in Manhattan on Tuesday. “We have a lot of work to do in the next six months.”

Ms. Hochul had earlier said she was “open-minded” about the moratorium, but did not consider enacting legislation that could hinder job creation in the above communities, where many mining operations are based.

Bitcoin mining is an essential verification process for the Bitcoin economy. Powerful computers plug into the bitcoin network and perform complex mathematical tasks to confirm the legitimacy of transactions, making quintile estimates of numbers in a second. As a reward for this service, digital miners receive new bitcoins, which provide a financial incentive to keep the computer running.

In the early years of Bitcoin, crypto enthusiasts could mine coins by running software at home, but as digital assets became more popular, the amount of power needed to generate Bitcoin decreased.

As the value of cryptocurrency has increased, bitcoin mining has become a major industry. There are publicly known crypto mining companies such as Riot Blockchain and Marathon Digital Holdings, valued at hundreds of millions of dollars. Although estimates vary, New York appears to have 19 mining operations that are either fully operational or could be completed by the end of the year, according to Assemblywoman Anna Kells, a Democrat who sponsored the lower house bill.

The move, passed by the Democratic-controlled state legislature, is intended to narrowly target crypto-mining companies that shut down some of New York’s oldest, dirtiest fossil fuel plants.

For the next two years, the bill will put a moratorium on new projects that use fossil-fuel plants to generate electricity “behind the meter” for crypto-mining, and the state needs to study the impact of the industry.

“Any delay in signing the bill puts our state at serious risk of many old, inefficient, retired power plants being purchased and turned back for integrated crypto-mining operations for private profit,” Ms. Kells said.

The proposed ban drew strong opposition from national cryptocurrency industry groups who were concerned that the moratorium could be a precursor to similar regulations nationwide, and some lawmakers who said it was inappropriately targeting new industry.

The industry has received a warm welcome in other states, prompting some opponents of the ban to argue that those interested in mining in New York could simply relocate. Last year, Kentucky passed a pair of bills creating tax incentives for crypto-mining companies. The proposed law in Illinois in January will amend state law to encourage mining companies to set up shop there. And both Texas and Georgia have adopted industry-friendly postures.

“It is a shame that the legislature has voted to impose a moratorium on bitcoin miners in New York,” Perion Boring, president of the Chamber of Digital Commerce, an industry advocacy group, said in a statement. “This is a significant setback for the state and will press its future as a leader in technology and global financial services.”

The bill was passed in the Assembly in April, but remained in the Senate for weeks until it was unexpectedly revived, and passed just before the Senate exits early Friday morning after fierce lobbying efforts and late night discussions.

Senator Kevin Parker, a Democrat from Brooklyn who sponsored the bill, said it was not intended to disappoint the industry. “If people want to do cryptocurrency mining in New York State, for which I’m very open, we need to do it sustainably,” he said.

The law came into force in New York last year after China cracked down on crypto mining, forcing some operations to relocate to the United States. Some miners are now reviving broken coal plants, or using low-cost natural gas to power their computers.

In New York, the spaces available for such businesses are former power plants scattered across the state that were the most polluted and inefficient in the state. Restarting them will reduce the greenhouse gas emissions it received from the shutdown. It will slow the state’s progress toward climate targets that it is legally bound to accomplish, amid growing concerns that it is already behind schedule.

The bill will not affect crypto mining projects that receive electricity from the grid. But some proponents say it should also be banned as they will hog precious electricity as the state scrambles to electrify houses, buildings and cars to meet climate targets.

The moratorium will also not affect existing projects such as the highly controversial Seneca Lake in Greenwich, although residents and tourism businesses in the surrounding Finger Lakes region backed the bill to prevent similar projects from taking root.

Boutique crypto miners are also unaffected, as individuals who work from their homes make a significant difference in maintaining the potential benefits of crypto for marginalized people. Kells.

The Senate passed a comprehensive version of the cryptocurrency moratorium bill last year, but it failed to gain enough traction in the assembly. When the moratorium proposal resurfaced during the election year for state legislators in 2022, it quickly became a hot-button issue as environmental groups renewed their pressure and the cryptocurrency industry began to marshal its own lobbying forces.

While some Democrats facing potential priorities from the left have come under pressure to support this and other environmental legislation, others have spoken out against it, arguing that it would destroy jobs and allow other energy-intensive industries to be unfair to the industry. Will target.

“I think most members still don’t understand industry and technology,” said State Senator Jeremy Cooney, a Rochester Democrat who opposed the moratorium. “It’s bigger than cryptocurrency. It’s about whether New York will be an open and inviting place to do business and engage in emerging technologies. “

Lobbies from two national groups – the Blockchain Association and the Digital Currency Group – also joined the debate in New York, seeing the defeat of the bill needed to prevent the same law from spreading nationwide.

Nevertheless, environmental groups kept shouting, and Ms. Kells, who called and texted his counterparts in the Senate to lobby him directly.

Upper Manhattan’s top-ranked Democrat, Senator Liz Kruger, said she phoned and texted colleagues to persuade them to change their minds, and lobbied face-to-face with others at the State Capitol on Thursday night.

“Smart entrepreneurs moving into the realm of cryptocurrency will realize that they can create better mousetrap and bring it to us to buy if they are not destroying our environment,” she said.

Anne Bernard contributed to the reporting.

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