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New York becomes first state to ban crypto mining powered by fossil fuel plants

Highlights

FTX bankruptcy heightens crypto risk awareness

Crypto mining energy use a national issue as well

  • Author
  • Jeff Beattie
  • Editor
  • Kate Winston
  • Commodity
  • Electric Power Energy Transition Metals

New York Gov. Kathy Hochul signed legislation Nov. 22 banning new crypto mining operations in the state that are powered by fossil-fuel generators, making New York the first state to do so.

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Hochul, who refrained from acting on the bill for nearly six months, said the practice is inconsistent with the state's environmental- and climate change-related goals.

The law bars for two years the issuance of new, renewed or expanded permits for fossil fuel power plants that deliver power for proof-of-work cryptocurrency mining, the energy-consumptive process by which digital money transactions are validated. It would not apply to plants that have already submitted paperwork for permits, and it creates no obstacles for crypto mining powered by renewables or any of the state's three nuclear plants.

Passed by the legislature in June, the legislation (S6486D) was controversial and bitterly opposed by industry groups as hostile to an important new part of the economy.

Hochul made the decision after having won a fresh four-year term earlier this month. She arguably also gained a measure of political cover from the recent, scandalous collapse of FTX Cryptocurrency Exchange, which dinged the reputation of the crypto sector as a whole.

But Hochul said her decision to sign the bill was driven by New York's environmental goals—and difficult because she strongly support the New York's upstate economy.

"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." Among other goals, the law directs New York to achieve carbon-free electricity by 2040 and a net-zero carbon economy by 2050, which the state is pursuing via support for renewables and emission-free nuclear power, building decarbonization and other measures.

National scrutiny

Hochul's decision to support the two-year ban come with Democrats at the national level also ramping up scrutiny of crypto-mining and its energy- and consumer-related impacts.

A group of Democratic Senators and House members warned the heads of the Energy Department and US Environmental Protection Agency in July about what they called cryptocurrency mining's "problematic" effects on greenhouse gas emissions and consumer energy costs, asking the agencies to require miners of the digital currencies to report their emissions and energy use.

In a letter to Energy Secretary Jennifer Granholm and EPA Administrator Michael Regan, the lawmakers said collection of such data could serve numerous public policy objectives – perhaps justifying new regulation of the digital mining sector.

"Our investigation suggests that the overall US crypto mining industry is likely to be problematic for energy and emissions. But little is known about the full scope of crypto mining activity," the legislators said. "Given these concerns, it is imperative that your agencies work together to address the lack of information about crypto mining's energy use and environmental impacts, and use all available authorities at your disposal...to require reporting of energy use and emissions from crypto miners."

The letter was signed by Sens. Edward Markey (Mass.), Jeffrey Merkley (Ore.), Elizabeth Warren (Mass.), Sheldon Whitehouse (R.I.), and Reps. Jared Huffman (Calif.) and Rashida Tlaib (Mich.).