New York Governor Kathy Hochul signed a law that temporarily imposes a partial ban on crypto mining operations that depend on fossil fuels and use carbon-based energy. The law prohibits all companies and businesses that have played an active role in proof-of-work (PoW) mining, barring them all from expanding and renewing their permits for the next two years. This move by Hochul has created a lot of ripple and buzz in the crypto industry, which is already bearing the brunt of the collapse of the FTX crypto exchange earlier this month. Hochul signed the law on November 22, preventing companies from indulging in any kind of cryptocurrency mining that has been using power generated from fossil fuels.
The law particularly targets PoW authentication. It is a method of mining that is used and required to validate blockchain transactions for cryptocurrencies such as Bitcoin. It needs a lot of electricity and sophisticated gear to create Bitcoin and other such tokens. This particular mining law was passed in the New York state assembly in April, and the state senate gave it the green signal in June 2022.
As per the legal filings in the matter, Hochul said, “It is the first of its kind in the country,” as reported by CNBC. The governor defended the decision by asserting that it was a key step for New York, according to the same CNBC report. Other justifications included that the state was trying to stop carbon footprint by imposing a crackdown on mines that need a lot of electricity generated from power plants by burning fossil fuels.
Also Read: Crypto Insurance: How It Works And Why Investors Should Take Note
A Bloomberg report states that the governor was postponing the signing of the mining law due to pressure from industry lobbyists. She justified the move as being necessary to “ensure that New York continues to be the centre of financial innovation.”
Multiple crypto experts and representatives of the industry have expressed their resentment and concerns about the ban. They think the curb could cause a domino effect all over the US, which is a major crypto-mining market. As per the CNBC report, the US represents about 38 percent of the world’s miners in the global bitcoin mining industry.
The Chamber of Digital Commerce said, “The approval will set a dangerous precedent in determining who may or may not use power in New York state.” Its founder, Perianne Boring, stated that the law could stifle the future of New York’s economy and its leadership position in technology and global financial services. It could even end up cutting jobs, leading to the “disenfranchisement of financial access to many underbanked populations,” according to her. Several other experts and industry leaders also shared the same concerns. For instance, Kevin Zhang, senior vice president of mining strategy and digital currency company, Foundry, said, “Not only is it clear signal that New York is closed for business to bitcoin miners, it sets a dangerous precedent for singling out a particular industry to ban from energy usage.”
Calling out the ban and exposing the irony in the law, Boring told the Crypto World that “proof-of-work mining has the potential to lead the global transition to more sustainable energy.” He further asserted, “The bitcoin mining industry is actually leading in terms of compliance with that ACT.” He was referring to New York’s Climate Leadership and Community Protection Act, which mandated a cut in the state’s greenhouse gas emissions by 85 percent by 2050.
Also Read: FTX Crash: How The Meltdown Of One Of The World’s Largest Crypto Platforms Led To Unprecedented Selloffs
John Warren, CEO of institutional-grade bitcoin mining company GEM Mining, said, “The regulatory environment in New York will not only halt their target-carbon-based fuel proof or work mining but will also likely discourage new, renewable-based miners from doing business with the state due to the possibility of more regulatory creep.” In the wake of the law banning bitcoin mining, industry experts have been warning that the crypto mining companies could be forced to shift their out to other states such as Georgia, North Carolina, North Dakota, and Wyoming. But this is not the first time that crypto mining has been banned due to the reasons for carbon reduction in the world.
In May 2021, Chinese lawmakers had imposed a ban on crypto mining due to the same environmental concerns. Not just this, several countries in Europe have also tried multiple methods to reduce and limit the power consumption in crypto extraction, in the past.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.