tl;dr Summary: A controversial bill limiting the mining of Bitcoin and other proof-of-work cryptocurrencies has now successfully passed through the New York State Assembly and Senate. Assembly Bill A7389C now only requires sign off from NY State Governor Kathy Hochul to become law. Governor Hochul is yet to commit to signing the proposal, sparking hope in the crypto community that she could veto the bill.
On Thursday 2nd June, the New York State Senate voted 35-28 in favor of Assembly Bill A7389C, sparking dismay for cryptocurrency enthusiasts in New York and beyond. Although widely reported as a ‘ban’ on Bitcoin mining, this is not quite the case. Instead, the bill would establish a two-year moratorium on new permits for proof-of-work mining operations that use a carbon-based fuel source. It would also veto permit renewals from any existing miners that wish to increase the size of their mining operations. Only applications from organizations using 100% zero-emission energy would be accepted.
Bitcoin and Ethereum, the two biggest cryptocurrencies by market cap, currently use proof-of-work consensus mechanisms to power their blockchain. Supporters of both argue that proof-of-work is the most secure and decentralized way to power a blockchain. The need for energy-intensive ‘mining’ operations in proof-of-work cryptocurrency has long-attracted criticism for its negative effects on the environment, however. The State of New York has committed to ambitious plans to transition to 100% zero-emission electricity by 2040. Those backing the bill state the included measures will help the state towards these goals.
Claims surrounding Bitcoin’s energy usage are highly controversial. Estimates of energy consumption vary significantly, however research from CoinShares in January 2022 found Bitcoin carbon emissions to amount to only around 0.08% of global emissions, an amount lower than that related to use of tumble driers worldwide. The conclusion of the report emphasized the potential revolutionary power of Bitcoin, in an attempt to justify Bitcoin’s share of global emissions, stating:
The Bitcoin network provides a global, freely available, censorship resistant, debasement protected, and human rights preserving monetary network for the entire world. Within that context, we believe the small addition to global emissions is absolutely worth the cost.
Ethereum is famously transitioning from proof-of-work to proof-of-stake consensus, in a move known as the Merge. This move is estimated to decrease Ethereum’s energy consumption by up to 99.95%. Despite this, Ethereum co-founder Vitalik Buterin took to Twitter to voice his displeasure at the bill, quoting a tweet from pro-crypto politician Bruce Fenton that stated “No government has the right to tell you what software to run.”
Buterin’s tweet formed part of a wave of social media backlash against the bill. Jake Chervinksy, head of policy at the Blockchain Association, called on New York Governor Kathy Hochul to veto the bill. Chervinsky tweeted that “at best,” the bill would have “zero impact on emissions,” but would more likely push miners to expand their operations in other areas with far fewer environmental regulations, leading to a net negative effect on the planet.
New York often acts as a leader for state legislation, thus a ban in New York could set off a domino effect with other states to follow suit. Given that the US accounts for over a third of Bitcoin’s global mining power, this would be highly damaging for the network. It is reported that mining companies are already turning away from New York amidst the ongoing regulatory uncertainty, looking to expand their operations instead in states with more favorable crypto regulation, such as Texas.
The ‘Markets in Crypto Assets’ bill in the EU was recently amended, with a clause that would have effectively banned proof of work mining removed after it was met with significant resistance. Many are hoping for a similar outcome in New York. Governor Hochul has previously stated the proposed act is a ‘balancing act,’ but has refused to publicly commit to signing the bill since it passed the Senate. In a press conference on Tuesday, the Governor simply stated:
“We’ll be looking at all of the bills very closely, so we have a lot of work to do over the next six months.”
