New York bitcoin mining companies are increasingly considering abandoning their efforts in the once-praised land as the state legislature considers a bill to ban new mining projects that use carbon-based energy sources until the industry's environmental impact is studied.
The New York State Senate is considering a bill calling for a two-year moratorium on new crypto mining projects that use gas, coal or other non-renewable energy sources after the Assembly version of the bill passed the state's lower house last week.
"All cryptocurrency companies have a permanent reprieve from setting up shop in New York due to the political and regulatory ambiguity," he said. If the bill passes, New York would become a permanent backlog for the industry," said Kyle Schneps, director of public policy at Foundry, one of the largest miners in the U.S., which is based in Rochester, New York. Foundry is owned by CoinDesk's parent company, Digital Currency Group.
Foundry's planned expansions in the state "will be restricted along with hiring," Schneps said.
The bill, passed by the state Senate in late April, places a moratorium on proof-of-work mining using non-renewable energy sources like those used in the Bitcoin network while environmental impacts are assessed.
Most crypto-mining companies are staying out of the state because of regulators' seemingly negative attitude toward the industry, said Whit Gibbs, CEO of Compass Mining, a hashrate marketplace that connects miners with investors around the world.
Didar Bekbau, co-founder of Kazakhstan-based miner Xive.io, which is looking to expand into the U.S., told CoinDesk that he chooses Texas because of favorable regulation and the availability of cheap electricity.
Regulatory uncertainty, including the bill, is one of the few factors keeping potential mining companies out of New York state, an executive at a local mining hosting company told CoinDesk. The rise in energy prices is another reason why companies are staying away from the state. The executive attributed the rise in electricity prices to global macro events such as the conflict in Ukraine, as well as the rising cost of renewable energy compliance in New York. The executive asked not to be named because of fears of retaliation from environmentalists and local officials.
This bill sends a "clear message to the crypto industry that New York is closed for business," Schneps said. It "sets a dangerous precedent" and is a case of "government overreach" because it restricts a new industry's right to power, dooming the industry, he said.
While the bill only targets mining operations that use fossil fuels, those that use renewable energy are wondering if they're next, John Olsen, who leads New York policy at advocacy group Blockchain Association, told CoinDesk. The original wording of the bill called for a moratorium on all types of mining, he said.
"Any kind of moratorium in the law is problematic because it can always be expanded or extended," Olsen said.
The mining companies Valkyrie Investments has talked to believe that the passage of such legislation would likely cause them to consider New York again in the future, said Steven McClurg, chief investment officer of the asset management company. But "the way the situation is now," mines powered by renewable energy "don't have much reason" to move elsewhere, he said.
Coinmint, which operates a 435-megawatt bitcoin (BTC) mine in a former aluminum smelter in Massena, New York, declined to comment on the bill. However, its CEO, David Fogel, said in an email to CoinDesk that the New York subsidiary "operates in an environmentally friendly manner using renewable energy from hydropower."
New York's about-face
Investment in mining in New York predates the exodus of miners from China, and today the state is at the center of a debate over how miners should be regulated in the United States.
New York is rich in hydropower: 70% of the energy generated locally comes from hydroelectric plants, but they provide only a quarter of the state's energy needs, according to the state's energy agency. New York also has some of the lowest electricity rates for businesses in the Northeast.
Environmental concerns have followed the crypto miners, with one mine in particular being targeted by environmentalists: the Greenidge Mine near Seneca Lake in New York State. This is a 1937 coal-fired power plant that was converted into a natural gas plant in 2014 and is now home to 19,400 bitcoin mining machines, with another 29,800 machines expected to be added by the end of the year.
Environmentalists claim the mine is polluting the lake and jeopardizing the state's carbon emissions targets. They have called on regulators and the federal government to deny renewal of the plant's air pollution permits. The New York State Department of Environmental Conservation (DEC) has postponed a decision on the matter until June 30, just two days after the gubernatorial primary, while the state Supreme Court has denied an injunction that would have halted the mine's operations before a ruling.
Last December, Massachusetts Senator Elizabeth Warren called on the company to submit information about its carbon footprint, stating that "mining operations at Greenidge and other facilities raise concerns about their impact on the global environment, on local ecosystems, and on consumers' electricity bills." Another letter to six mining companies in the U.S. followed a month later.