New York is taking a first-in-the-nation step to tap the brakes on the spread of cryptocurrency mining, under legislation that Gov. Kathy Hochul signed on Tuesday. The measure comes amid growing scrutiny of the cryptocurrency industry following this month’s collapse of the FTX exchange.
But New York’s measure, which passed the state Legislature in June, is specifically concerned with the environmental aspects of crypto. “I will ensure that New York continues to be the center of financial innovation, while also taking important steps to prioritize the protection of our environment,” Hochul, a Democrat, said in a message explaining her approval.
The new law sets a two-year moratorium on new and renewed air permits for fossil fuel power plants used for energy-intensive “proof-of-work” cryptocurrency mining — a term for the computational process that records and secures transactions in bitcoin and similar forms of digital money.
Proof-of-work is the blockchain-based algorithm used by bitcoin and some other cryptocurrencies.
The law also requires the Department of Environmental Conservation to asses how cryptomining affects the state’s ability to meet its climate goals. Environmentalists said New York was undermining those goals by letting cryptomining operations run their own natural gas-burning power plants.
Cryptocurrency advocates, meanwhile, argued that the measure would crimp New York’s economic development, and singled out crypto while not addressing other fossil fuel use. Cryptocurrency mining requires specialised computers that consume large amounts of energy.
One study calculated that as of November 2018, bitcoin’s annual electricity consumption was comparable to Hong Kong’s in 2019, according to the US Energy Information Administration. Some miners are looking for ways to reduce their reliance on fossil fuels to produce the necessary electricity.