States Debate Whether To Restrict — Or Invite — Crypto Mining

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States Debate Whether To Restrict — Or Invite — Crypto Mining

SEATTLE. As cryptocurrency mining gains more and more attention on Washington's Capitol Hill, lawmakers in some states are considering proposals to restrict the industry due to growing concerns about energy use. However, other states are pushing legislation to protect cryptocurrency miners from such retaliation, citing the economic potential of mining hosting.

Last year, New York became the first state to restrict cryptocurrency mining due to energy consumption. Lawmakers have imposed a two-year moratorium on new mining operations using electricity supplied directly from fossil fuel plants. The bill was drafted in response to mining companies converting old coal and gas-fired power plants to support their operations.

Bitcoin mining machines at the Winston US Bitcoin mining warehouse in Rockdale, Texas on October 10, 2021.

“Can we achieve our climate goals by increasing the cryptocurrency mining in our network?” said Rep. Anna Keles, the Democrat who supported the bill, asked. - This is an important question.

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The measure also required a study by the New York City Department of Environmental Protection to examine the industry's environmental impact. Keles said he would look into air and water pollution, as well as the potential of cryptocurrency mining to divert renewable energy from existing needs and increase pressure on the state's transmission infrastructure. According to him, this study can become the basis for future legislation and regulations.

Now, some lawmakers in Washington and Oregon want to expand emissions and clean energy standards to exclude current cryptocurrency mining operations.

Cryptocurrency mining is the process by which bitcoins and other digital currencies confirm transactions and create new currencies. “Miners” control computers that contribute to the computing power of a decentralized network that validates virtual ledgers by solving complex equations created by the currency protocol. The first miners to develop these equations are rewarded with new coins or cryptocurrencies.

Mining requires powerful computers, often in specialized facilities that consume large amounts of electricity. Last year, the Biden administration published a fact sheet stating that cryptocurrency consumes between 0.9% and 1.7% of the country's electricity consumption. The White House noted that the industry's rapid growth "could hinder broader efforts to meet the U.S. climate commitment to achieve zero carbon emissions."

But many state legislators see the industry's growth as a positive.

“Now we need to plant our flag as a crypto-friendly state,” the Republican said. This was stated in an interview with Stateline by Phil Cristofanelli of Missouri. "It will continue to grow and we want Missouri to be open and welcoming to this new form of innovation and industry."

Cristofanelli sponsored the “right to mine” law, which prohibits local governments from restricting cryptocurrency mining. The bill also exempts cryptocurrencies from property tax and states that digital currencies do not require the same license required for banks.

The bill approved by the committee earlier this month is similar to measures proposed this year in Montana and Mississippi. A Montana bill passed by the State Senate last month and awaiting a House hearing would ban zoning restrictions targeting cryptocurrency miners. It will also instruct the State Public Utilities Commission to offer miners electricity rates that are in line with other industrial customers.

“We just want to make sure the rules are known and fair so that if companies want to invest in Montana, they know what it is,” said State Sen. Daniel Zolnikov, the Republican who is the bill's sponsor. “Maybe something important is happening, or maybe not, but why don’t we open the door and take a look?”

While some see the economic potential of cryptocurrencies as promising, others believe that their rise could hinder the government from meeting its clean energy goals.

“There are a lot of green electrons out there right now,” said Mandy DeRoche, a clean energy management lawyer at Earthjustice, a nonprofit environmental law group. “We are not going to meet our emissions targets with this additional burden.”

DeRoche raised concerns about electricity rates in areas where new infrastructure needs to be built to meet the needs of cryptocurrency mining, adding that the jobs the industry creates rarely live up to initial promises.

But industry advocates say its activities can be an asset rather than a hindrance to the network. They argue that cryptocurrency mining operations will create demand that will help developers create more wind and solar energy, creating a huge “faucet” for that energy when production exceeds demand from homes and businesses.

“This is an alternative funding stream for these companies, so they will be interested in creating renewable clean energy,” said Tom Mapes, director of energy policy for the Digital Chamber of Commerce, a blockchain advocacy group. "In areas where there's excess power, it's really handy."

Inside the cryptocurrency revolution

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