The New York State Assembly recently passed legislation that would hinder economic opportunity and innovation across the state at a time when jobs and economic growth are critical to the state's economy.
Bill A.7389C places a moratorium on approving new applications or permits for digital asset mining, also known as proof-of-work mining, which uses electricity from carbon-based fuels like coal. However, this short-sighted proposal will do little for the environment and cause real harm to areas in New York that are struggling to attract new, innovative businesses.
Teana Baker-Taylor is Chief Policy Officer at the Chamber of Digital Commerce, a leading trade association for the digital asset and blockchain industry.
Proof-of-work authentication verifies blockchain transactions for bitcoin, and like all industrial activities, it consumes energy. However, it is a misconception that proof-of-work mining consumes more energy than other industries. Policymakers in New York have set ambitious goals to curb climate change. In 2019, the state introduced the Climate Leadership and Community Protection Act, which mandates that statewide greenhouse gas emissions be reduced by 85% by 2050 and that the state have net-zero emissions in all sectors of the economy by then.
It is estimated that proof-of-work consumed 247 terawatts of energy in 2020, or about 0.16% of global energy consumption. Eliminating proof-of-work mining would not significantly reduce carbon emissions and would slow the country's transition to and use of more renewable energy.
The transition to cleaner energy sources will require significant investment in new energy technologies by industries committed to working with policymakers and the energy industry. Proof-of-work miners serve as reliable repeat customers, providing utilities with consistent demand - and revenue - to build clean energy infrastructure. An added benefit: They can shut down power to meet critical electricity demand elsewhere, almost instantly - something other high-demand industries simply can't do.
For example, if customer demand spikes in mid-summer in Manhattan or mid-winter in Buffalo, digital asset miners can work with utilities to curb their demand. The power consumed by proof-of-work miners flows back into the grid, providing additional capacity to end users within minutes, with no disruption. No other industry that consumes similar amounts of energy, including data centers, cloud service providers and manufacturing facilities, is able to do this.
It is also important to note that the Bitcoin Mining Council estimates that the sustainable power mix of the global mining industry is 58.5%, and rising, even as digital asset mining has increased in recent years. The percentage for Chamber of Digital Commerce Mining Initiative members with infrastructure in New York is estimated to be even higher, at 80%. Few industries can boast such an environmentally friendly profile.
This sustainability impact will only increase over time as digital asset miners partner with utilities, energy providers, municipalities, and other groups to develop new energy capacity in New York by creating new and valuable economic incentives for energy companies to build green infrastructure and energy resources. The evolving proof-of-work processes will increasingly shift to more efficient ways to deliver energy and pay dividends for local communities, including through job creation, especially among unions like the International Brotherhood of Electrical Workers (IBEW), and increased local and state tax revenues.
Many states want to encourage digital asset extraction and are willing to attract New York-based companies seeking a friendlier environment. Georgia and Illinois have proposed tax incentives to attract digital asset mining companies to build facilities in their states. In Texas, stakeholders have noted that proof-of-work mining has helped boost the economy, create jobs, encourage the development of renewable energy such as solar and wind power, and improve the tax base.
Digital asset technologies are an emerging global financial industry. According to some estimates, more than 100 million people worldwide have adopted Bitcoin. Proof-of-work mining is the foundation of this ecosystem. Digital assets offer millions of people in less fortunate economic circumstances the opportunity to access the financial system by storing their savings in a medium that is independent of rapidly rising inflation, bank fees, and the long-standing inequities in our banking system.
It is critical that New York remain a leader in global financial services, rather than hindering an industry vital to the nation's future. Together, the digital asset mining industry and New York can set the standard for expanding sustainable, ethical business growth. The state Senate should reject this proposal when it comes up for a vote in the coming days.