Updated on January 10, 2023 2:14 PM
As the first state to enact such a restriction, New York Governor Kathy Hochul has enacted one of the country's most stringent regulations governing cryptocurrency mining.
The measure imposes a two-year freeze on issuing new permits to cryptocurrency mining businesses that rely on fossil fuels for electricity and authenticate transaction data using proof-of-work authentication techniques using millions of computers.
As a result, the businesses receive compensation from the blockchain network in the form of tokens. The Bitcoin network uses the proof-of-work authentication method. Bitcoin mining facilities have cost billions of dollars to run, and they may use as much energy as an entire country does.
The state Senate gave its approval to the law in June 2022, but Hochul didn't sign until after the results of the governor's election, being subjected to intense opposition from the cryptocurrency market. Hochul had stated during a debate for governor in October that she was "looking at that bill closely," but she did not express an intention to approve it.
Since China outlawed cryptocurrency mining in May of last year, New York has emerged as one of the largest centers for mining. Because of the state's inexpensive energy costs and temperate environment, mining activities there are more productive. However, environmental activists have become more aware of the costs associated with such actions.
The United States currently holds the biggest share of the world's Bitcoin mining hash rate, making up 37.8% of the network's total hash rate. The two-year prohibition on PoW mining would be costly, but it could even encourage other states to follow suit. There has been significant lobbying over the last year, notably from those who promote proof-of-stake (PoS) mining, despite the fact that the FUD around proof-of-work (PoW) mining is nothing fresh and has been widely disproved.
The bill, regarded as the first of its type in the United States, has started hearing the outcry of climate change advocacy groups concerned about the environmental impact of crypto mining operations. Conservative environmentalists said that Bitcoin mining consumes a lot of power and produces toxic gases that affect the environment.
In a memo released the same day as approval, Hochul stated, "I will ensure that New York continues to be the center of financial innovation, while also taking important steps to prioritise the protection of the environment."
Environmental organisations applauded Hochul's choice to approve the legislation. According to Richard Schrader, the Natural Resources Defense Council's New York Legislative and Policy Director, "the state's dramatically energy-intensive mining facilities, whose massive carbon footprints exacerbate climate change, have had little oversight for too long."
Societies in New York's upstate may suffer if outdated coal power plants come back to life as "zombie plants" that mine cryptocurrency 24 hours a day, not just because cryptocurrency harms the environment.