New York governor signs first-of-its-kind law cracking down on bitcoin mining — here’s everything that’s in it

New York Governor Kathy Hochul signed Tuesday’s law banning certain Bitcoins
Mining operations that use carbon-based power sources are not allowed to operate. If a proof of work mining company does not use 100% renewable energy, they will be prohibited from expanding or renewing permits for the next two-years. New entrants will also be barred.
Hochul stated in a legal filing that “it is the first of its type in the country,”
It was also a crucial step for New York as it looks to reduce its carbon footprint by cracking down against mines that generate electricity from fossil fuels. This law comes at a time when the crypto industry is reeling from the collapse of Sam Bankman Fried’s FTX. It was once one the most trusted and loved names in the sector.
The New York state legislature passed its mining law in April. In June, the state senator passed it. It calls for a two year moratorium on certain cryptocurrency mining operations that use proof-of work authentication methods to verify blockchain transactions. To create bitcoin and other tokens, proof-of-work mining requires sophisticated equipment and lots of electricity.
CNBC hears from industry insiders that it could cause a ripple effect in the U.S., currently the leader of the global bitcoin mining sector, with 38% of all the world’s miners.
The Chamber of Digital Commerce stated in a statement that “The approval will set an alarming precedent in determining who may use power in New York State.”
Kevin Zhang, founder of digital currency company Foundry, agrees with this sentiment.
Zhang, Foundry’s senior vice-president of mining strategy, stated that this is a clear indication that New York is now closed to bitcoin miners. It also sets a dangerous precedent to target a specific industry for energy bans.
According to Perianne Boring of Chamber of Digital Commerce this would have a negative effect on New York’s economy and force businesses to look elsewhere for work.
“This is a major setback for the state, and will stifle it future as a leader of technology and global financial service.” Boring stated that this decision will result in the loss of critical union jobs, and further deprive the Empire State’s many underbanked residents of financial access.
The law went into effect when the governor signed it.
Irony in banning bitcoin mining
One section of this law requires that a study be done in New York on the impact of proof of work mining operations on New York’s ability to achieve aggressive climate goals under the Climate Leadership and Community Protection Act. This Act mandates that New York’s greenhouse gas emission reductions must be reduced by 85% by 2050.
Boring tells CNBC that the recent surge in support for the ban stems from the mandate to transition towards sustainable energy.
Boring stated that proof-of-work mining could be a catalyst for the global transition towards more sustainable energy. He also pointed out the irony in the moratorium. “The bitcoin mining sector is actually leading in terms compliance with that Act.”
Today, the global bitcoin mining industry has a sustainable energy mix of just below 60%. The Chamber of Digital Commerce found that its members in New York have a sustainable electricity mix closer to 80%.
John Warren, CEO at GEM Mining, an institutional-grade bitcoin mining company, stated that the regulatory environment in New York will not only stop their target – carbon based fuel proof work mining – but also will likely discourage new, renewable-based miners doing business with the State due to the potential for more regulatory creep.
According to the U.S Energy Information Administration, a third of New York’s state-generated electricity comes from renewables. New York’s nuclear power plants are counted towards its goal of 100% carbon-free electricity. The state also produces more hydroelectric energy than any other state east the Rocky Mountains.
It also boasts a cold climate which means that less energy is required to cool the crypto mining computers. There’s also a lot of industrial infrastructure left over that can be repurposed.
Andrew Yang, a former presidential candidate from New York, told CNBC at the Bitcoin 2022 conference that mining operations can be used to increase demand for renewable energy.
Yang stated that a lot of Yang’s stuff will push activity to places where it might not be possible to achieve the policymakers’ goal.
Some people in the industry don’t wait for the state to ban them before they take action.
Data from Foundry, a digital currency company, showed that New York’s share in the bitcoin mining network fell from 20% to 10% earlier this year as miners started migrating to crypto-friendly areas in other parts.
Zhang, Foundry’s Director of Marketing, stated that customers are scared to invest in New York State.
Zhang continued, “Even with Foundry’s $500 million capital commitment towards mining equipment investment, less than 5 percent has gone to New York due to the unfriendly political environment.”
The domino effect
The governor has signed the crypto mining moratorium into law. It could have many follow-on effects.
CNBC has heard from industry advocates that these facilities can impede investment in sustainable energy sources. They also have significant economic impact on local vendors, which include electricians, engineers and construction workers. Experts believe that a mass exodus from crypto miners could lead to tax dollars and jobs moving out of the state.
Boring stated that “there are many labor unions against this bill due to its dire economic consequences.” Boring stated that Bitcoin mining operations provide high-paying, high-quality jobs in local communities. Their average annual salary is $80,000, according to one of our members.
Hochul addressed these concerns in Tuesday’s statement. She stated that she recognizes the importance of creating economic opportunity in communities that are left behind and that she will continue to invest in economic development projects that provide the jobs of tomorrow.
Boring points out that New York is the leader in state legislation. This means there is potential for copycat phenomena across the country.
Zhang of Foundry said that other blue states follow New York’s lead and it would give them a template to copy.
“The network will be fine, it was attacked by China’s nation-states last summer. But the implications of where and how the technology will scale in the future are not clear.