Fight looms over New York’s offer to slow down the Crypto-Mining Boom

ALBANY, NY – Across the nation, some states are trying to attract cryptocurrency mining companies and offer tax incentives to create jobs and expand their foothold in the technology industry.

In New York, lawmakers are moving in a different direction: In the last hours of the 2022 session, the state legislature unexpectedly approved a two-year ban on new cryptocurrency mining permits last week, especially for burning fossil fuels. some power plants, which have redirected some businesses to power energy-intensive activity.

The innovative law, which would become the first state to impose such a moratorium on New York, has the power to influence the rules of other states or at the federal level.

The passage of the bill was a major setback for a growing and deep-seated industry, a left-wing coalition of left-wing MPs, climate activists and even winemakers, arguing that the cryptocurrency of the future would have an environmental cost. mining.

“Other blue states may introduce such legislation based on the efforts of the environmental lobby,” said John Olsen, a senior representative for the New York Blockchain Association, an industry group that opposed the moratorium. “That’s definitely a concern.”

It is unclear, however, whether Gov. Kathy Hochul will sign the bill. And the cryptocurrency industry is expected to invest heavily in convincing the measure to abandon the measure and influence other industry-friendly rules in Albany.

Madam. The Hochul campaign has already received $ 40,000 from Coinmint CEO Ashton Soniat, who has a crypto-mining operation in Massena, NY, a small town in northeastern Niagara Falls on a former aluminum plant.

It has been a much greater political gift for the lady. Hochul’s lieutenant governor, Antonio Delgado, faces two major challenges this month. A super PAC, the founder of FTX, a major cryptocurrency exchange, has spent about $ 1 million in digital advertising in recent weeks in support of its campaign, according to state files.

Michael Levine, a spokesman for the super PAC, said he had focused only on supporting candidates who believed they would support pandemic preparedness measures. But the five ads that are spreading across the state are Mr. Delgado works on climate change, infrastructure, abortion and schools.

The company pays $ 12,000 a month to a Hinman Straub consulting firm to lobby the state government for cryptocurrency regulations, according to state records. FTX founder Sam Bankman-Fried said in a statement that the company had requested a letter of confidence to operate in New York and had been in talks with regulators about its application.

The governor, a moderate Democrat in the run-up to the June 28 primary election, has not pledged whether he would sign the bill, a priority for environmentalists and left-wing party activists. Madam. Hochul will probably not have to make a decision until December. 31.

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

Madam. Hochul said he had an “open mind” about the moratorium, but also noted that there were no laws in the state communities that could prevent job creation in areas where there are many mining operations.

The Bitcoin mining verification process is crucial to the Bitcoin economy. Powerful computers connect to the Bitcoin network and perform complex mathematical tasks to confirm the legitimacy of transactions, and make millions of numerical inventions in a second. As a reward for this service, digital miners receive new Bitcoins, providing an economic incentive to keep computers running.

In the early years of Bitcoin, a crypto-fan could take out coins at home by running software, but as digital assets became more popular, the power needed to create Bitcoin increased.

As the value of cryptocurrencies has increased, Bitcoin has become an important mining industry. There are public crypto mining companies like Riot Blockchain and Marathon Digital Holdings that are worth hundreds of millions of dollars. Although estimates vary, it appears that there are 19 mining operations in New York that are fully operational or may be in place by the end of the year, according to Assemblywoman Anna Kelles, the Democrat who backed the bill in the lower house.

The measure, approved by the Democratic-controlled state legislature, is aimed at crypto-mining companies who want to reuse some of New York’s oldest and dirtiest fossil fuel plants as they are out of service.

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

“Any delay in signing the bill puts our state at serious risk of buying old, inefficient and retired power plants and reviving them for joint profit from joint crypto-mining operations,” she said. said Kelles.

The proposed ban sparked strong opposition to national cryptocurrency groups, who were concerned that the moratorium could be a pioneer in similar rules at the national level, and said some lawmakers had unfairly targeted the new industry.

The industry has received a warmer reception in other states, arguing that some opponents of the ban could relocate those interested in mining in New York. Last year, Kentucky approved a couple of bills to create tax incentives for crypto-mining companies. Legislation proposed in Illinois in January would change state law to extend incentives to mining companies that set up stores there. And Texas and Georgia have both taken a positive stance on the industry.

“It is a pity that Parliament has voted to impose a moratorium on Bitcoin miners in New York,” said Perianne Boring, president of the Digital Chamber of Commerce, a group promoting the industry. “This is a major setback for the state and will drown its future as a leader in global technology and financial services.”

The bill was approved by the House in April, but was postponed for weeks in the Senate, revived unexpectedly and approved by the Senate before it was adjourned Friday morning due to heated lobbying efforts and nightly debates.

Senator Kevin Parker, who backed the Brooklyn Democrat bill, said he did not want to discourage the industry. “People are very open in New York State if they want to do cryptocurrency mining, we need to do it in a sustainable way,” he said.

New York law comes after China faced cryptographic mining last year, and had to relocate some operations to the United States. Some miners are recovering broken coal plants, or are using low-cost natural gas to power their computers.

In New York, the spaces for such businesses are the former power plants scattered across the north of the state, which were among the most polluting and inefficient in the state. Restarting would reverse the greenhouse gas emission reductions achieved by these blackouts. This would slow down progress towards the state’s legally binding climate targets, which are already lagging behind amid growing concern.

The bill would not affect cryptographic mining projects that extract electricity from the grid. But some supporters say that these should also be banned because the state would take precious electricity in an effort to electrify homes, buildings and cars to meet climate goals.

The moratorium will also not affect existing projects in Greenidge, Seneca Lake, as discussed, although residents and tourism companies in the surrounding Finger Lakes region have argued that the bill should not be rooted in similar projects.

Uninfluenced are boutique crypto miners, like people who operate from their homes, an important distinction that serves to preserve the potential benefit of cryptography for marginalized people, according to Ms. Kelles.

The Senate last approved a broader annual version of the cryptocurrency moratorium bill, but did not get enough traction in the House. When the proposed moratorium resurfaced in 2022, in an election year for state law, it quickly became a major issue when environmental groups renewed their momentum and the cryptocurrency industry began to lobby its forces.

While some Democrats who oppose potential left-wing primaries have come under pressure to protect this environmental legislation and others, others have strongly opposed it, arguing that it would kill jobs and undermine an industry while leaving it to other energy-intensive industries.

“I think most members still don’t understand industry and technology,” said State Sen. Jeremy Cooney, a Democrat from Rochester, who opposed the moratorium. “This is bigger than cryptocurrency. Will it be an open and inviting place for New York to do business and engage in emerging technologies?

The lobbies of the two national groups — the Blockchain Association and the Digital Currency Group — were also involved in the New York debate to see if the failure of the bill was necessary to prevent similar legislation from spreading across the nation.

However, environmental groups continued to shout, as did the women. Kelles called his Senate members and sent them messages directly to lobby.

Senator Liz Krueger, a senior Democrat from Upper Manhattan, said she also called colleagues and sent messages to persuade them to change their votes, and lobbied others at the State Capitol on Thursday night.

“Smart activists entering the field of cryptocurrencies will realize that they can build a better mouse trap and buy that if they don’t destroy our environment,” he said.

Anne Barnard contributed to the report.

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