On Friday, New York lawmakers passed a bill that will prohibit crypto mining operations running on carbon-based power sources, in a first of its kind move in the United States that poses further threat to the troubled cryptocurrency market.
The move comes along with the push for cleaner energy being spearheaded by President Joe Biden’s administration. Governor Kathy Hochul is expected to sign or veto the bill, which could mean a win or loss for cleaner energy transactions.
Industry insiders told CNBC that a ban could have a domino effect across the U.S., which is currently at the forefront of the global bitcoin mining industry, accounting for 38% of the world’s miners.
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In further report on the bill below, CNBC said it was previously passed by the State Assembly in late April before heading to the State Senate, and calls for a two-year moratorium on certain cryptocurrency mining operations which use proof-of-work authentication methods to validate blockchain transactions.
Proof-of-work mining, which requires sophisticated gear and a whole lot of electricity, is used to create bitcoin. Ethereum is switching to a less energy-intensive process, but will still use this method for at least for another few months.
The push for an eleventh-hour vote came as leadership in the state capitol managed to flip some of the senators who were previously undecided.
Lawmakers backing the legislation say they are looking to curb the state’s carbon footprint by cracking down on mines that use electricity from power plants that burn fossil fuels. If it passes — for two years, unless a proof-of-work mining company uses 100% renewable energy, it would not be allowed to expand or renew permits, and new entrants would not be allowed to come online.
The net effect of this, according to Boring, would be to weaken New York’s economy by forcing businesses to take jobs elsewhere.
“This is a significant setback for the state and will stifle its future as a leader in technology and global financial services. More importantly, this decision will eliminate critical union jobs and further disenfranchise financial access to the many underbanked populations living in the Empire State,” Boring tells CNBC.
It is a sentiment echoed by Galaxy Digital’s Amando Fabiano, who says that “New York is setting a bad precedent that other states could follow.”
As for timing, the law would go into effect as soon as the governor signs off.
The crypto industry has been facing a pushback from environmental activists who are concerned about the carbon footprint from its mining operations. The US offered the crypto market a lifeline after the Chinese authorities clamped down on mining last year, due to its heavy energy consumption that resulted in power outages in some Chinese provinces. China was leading global cryptocurrency mining then.
The New York bill said Cryptocurrency mining operations running proof-of-work authentication methods to validate blockchain transactions are an expanding industry in the State of New York; and the continued and expanded operation of cryptocurrency mining operations running proof-of-work authentication methods to validate blockchain transactions will greatly increase the amount of energy usage in the state of New York, and impact compliance with the Climate Leadership and Community Protection Act.
If more US states follow the steps of New York, assuming the bill is not vetoed by Hochul, it will also mean loss of jobs in the cleaner energy sector.
“The regulatory environment in New York will not only halt their target – carbon-based fuel proof of work mining – but will also likely discourage new, renewable-based miners from doing business with the state due to the possibility of more regulatory creep,” said John Warren, CEO of institutional-grade bitcoin mining company GEM Mining.
But there is another concern. Beyond potentially stifling investment in more sustainable energy sources, industry advocates tell CNBC that each of these facilities drives significant economic impact with many local vendors consisting of electricians, engineers, and construction workers. An exodus of crypto miners, according to experts, could translate to jobs and tax dollars moving out of state.
“There are many labor unions who are against this bill because it could have dire economic consequences,” said Boring. “Bitcoin mining operations are providing high-paying and high-grade, great jobs for local communities. One of our members, their average pay is $80,000 a year.”