If the New York Governor signs this crypto mining ban into law, it could have a huge impact on the cryptocurrency industry and on other states. It could stifle investments in renewable energy resources, put local vendors out of work, and drive serious “taxable income” out of state.
Carbon offsets for crypto mining
The new legislation that targets cryptocurrency mining in New York will affect a range of companies. Specifically, it will impact operations that use proof-of-work methods to validate blockchain transactions. Because these operations generate a great deal of energy, they will be penalized under the bill. However, those businesses that use renewable energy will still be allowed to operate.
Greenidge Generation Holdings, which runs a 40-MW bitcoin mining facility in upstate New York, plans to offset its emissions with carbon offset credits. The company also plans to invest its mining profits into a portfolio of green energy projects in New York. However, its plans are not without controversy, and the company has faced opposition from environmentalists, particularly over its plans to expand its bitcoin mining facility.
Carbon offset projects must be transparent and verifiable. If offsets are not transparent and verified, they may not be worth the effort to purchase. However, the crypto industry is increasingly aware of the need to be environmentally responsible, and the cryptocurrency ecosystem is primed to accept ambitious carbon offset projects. This includes tokenized carbon offsets that harness the power of blockchain to verify carbon credits.
However, if these new laws are passed and the Federal Energy Regulatory Commission adopts robust carbon offset disclosure requirements, there is a risk that digital assets may lose their value. The cryptocurrency industry is full of bold claims about its climate-friendly practices, but it often uses flared natural gas and coal refuse. This mismatch between words and deeds creates additional risks in the transition process.
Some North American crypto miners have begun to move toward 100% renewable energy, but this will be a long way from zero. While some companies will be completely renewable by the end of the decade, the majority will still be dependent on fossil fuels. However, when they grow, they are expected to use more energy, and carbon offsets are crucial to this transition.
To ensure that the crypto industry remains environmentally friendly, governments must take bold steps to regulate it. They should not be too focused on debates over whether crypto is valuable or not, but rather on the issue of climate change and the potential impact it will have. The key is to create a balanced mix of regulations and incentives that encourage sustainable growth.
Crypto-asset mining operations generate huge amounts of energy and produce noise. The activities also cause local air and water pollution and electronic waste. This is detrimental to neighboring communities. These operations are also a barrier to efforts to achieve net-zero carbon pollution in the United States. If this continues, it could undermine efforts to reduce carbon pollution and abide by the Paris Agreement.
Impact of ban on cryptocurrency industry
The ban on cryptocurrency trading has sparked fear in investors. China’s government banned the trading of cryptocurrencies and made it illegal for Chinese start-ups to raise funds through ICOs. While the ban caused a steep fall in cryptocurrency prices, investors were unlikely to be affected in the long run. China is one of the largest mining pools, controlling around 60% of the world’s total hash rate.
As a result, regulators are attempting to increase communication with cryptocurrency companies, including Binance, the largest crypto exchange by volume. Binance has expressed its concerns and plans to improve communication with the regulator. It’s unclear how the ban will affect the industry, but there are some possible outcomes.
The crackdown has already led to some companies leaving China. Coinbase and Worldcoin Global have declined to comment on the ban in China. Nevertheless, this is a blow to the industry in the country. The pressure has driven many crypto companies to the United States and other countries. In fact, only about a quarter of China’s original cryptocurrency peer-to-peer lending startups are still headquartered there. As these companies leave, it will make mining for digital currency easier abroad.
While the ban in New York is a setback, it doesn’t mean that there aren’t still viable cryptocurrency mining projects. Despite the ban, some people in the industry aren’t waiting for it. In fact, New York’s share of the cryptocurrency mining network dwindled from 20% to 10% in a few months, as miners moved to more crypto-friendly jurisdictions. Similarly, bitcoin mining company Foundry has deployed $500 million in mining equipment to other states, and less than five percent of that money remained in New York.
As bitcoin and other cryptocurrencies have become a mainstream part of the financial system, governments are increasingly concerned about their safety. However, cryptocurrencies like bitcoin and Ethereum can be useful hedges against currency depreciation. Moreover, they undermine the ability of central banks to control spending, investment, and inflation.
India’s parliament has announced it will consider proposals for restrictions on digital currencies. The ban would affect the estimated seven million Indian investors. However, it’s unclear if the proposed ban will be as drastic as some fear. The government hasn’t yet decided on the exact terms of its new legislation, and top government officials have reportedly taken a softer tone on the topic.
Regardless of its impact on the cryptocurrency industry, the ban is likely to cause widespread uncertainty in the crypto industry. For the moment, cryptocurrency mining is legal in Russia, but the country’s central bank is considering a ban on the cryptocurrency industry in 2020. Despite the concerns, cryptocurrency mining has thrived in the country over the past few years, and Russia’s parliament approved it last year.
A broader ban on cryptocurrency mining in New York failed to gain traction with the Assembly last year. The crypto industry was quickly mobilized to lobby against the legislation. It is now expected to invest heavily in lobbying to influence Gov. Hochul’s decision to reject the ban, and to influence other state laws that benefit the industry.
Environmental impact of crypto mining
The state Assembly recently passed legislation prohibiting carbon-based cryptocurrency mining, a move that could have significant implications for the environment. It aims to stop cryptocurrency mining operations in New York from producing electricity through behind-the-meter energy, and requires the state Department of Environmental Conservation to conduct an environmental impact assessment. The measure still needs to be signed by Governor Kathy Hochul.
The bill requires the state to produce a generic environmental impact statement, which addresses the current scope of cryptocurrency mining in New York and anticipated expansion of the industry. It also demands data on greenhouse gas emissions and other pollutants associated with crypto mining. Other requirements include data on the use of water, the ecological impact of cooling water, and the economic and social costs of mining.
Cryptocurrency mining in New York poses significant environmental concerns, particularly since the process can contaminate sensitive waters. A large portion of the water used for crypto mining is discharged directly into Seneca Lake. This has raised concerns among residents in the Finger Lakes region. The Greenidge Power Plant is licensed to discharge at least 139 million gallons of hot water each day. These hot water discharges can stress fish and increase toxic algae blooms.
Cryptomining can generate massive amounts of carbon emissions. The emissions are not only damaging to the air, but can also have negative health consequences. The toxic chemicals can cause respiratory and cardiovascular problems. In addition, cryptomining facilities also generate massive amounts of e-waste compared to the production of a mid-sized country.
While the cryptocurrency industry is growing in popularity, many community organizations are concerned about the environmental impacts of proof-of-work power plants. They are urging Governor Hochul to enact a moratorium on crypto mining in New York and require a statewide Generic Environmental Impact Statement. Furthermore, Governor Hochul should reject any applications for coal-fired power plants or other facilities that would allow cryptocurrency mining.
The proposal would also mandate the state’s Department of Environmental Conservation to produce a report on the public health and environmental impacts of crypto mining. This report would help guide future legislation. In addition, the bill would establish a task force to study the cryptocurrency industry in New York. The committee would include government officials and environmentalists. It would be required to produce a report on the industry by December 2024.
The cryptocurrency industry has mounted a fierce lobbying campaign against Kelles’ bill. In addition to Vanel, several firms have spent hundreds of thousands of dollars lobbying legislators. The group, called the Blockchain Security Industry Coalition, claims to represent cryptocurrency developers, miners, and users.