If you’re a cryptocurrency miner based in New York, it may be time to pack up shop. The New York Senate passed Bill S6486D banning cryptocurrency mining in the state when relying on carbon-based energy sources to power their operation. Here’s a closer look at what’s in the bill and what the cryptocurrency community needs to know.
- The state of New York is considering a law that would ban cryptocurrency mining in the state if not powered by a renewable energy source.
- The bill, already passed in the New York Senate, could significantly impact cryptocurrency mining capacity, prices, and fees.
- Cryptocurrency mining can be energy-intensive and has been banned in other jurisdictions for various reasons.
What's in Bill S6486D?
The bill passed the New York State Senate in a 36-27 vote in June, after having passed the Assembly in April. It now awaits Kathy Hochul to sign or veto.
According to the New York Senate, this bill "establishes a moratorium on cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions; provides that such operations shall be subject to a full generic environmental impact statement review."
Basically, the bill stops new fossil-fueled crypto mining operations for the next two years, and it pauses renewals for existing operations. It also caps the electrical consumption of existing operations at their current levels. But, miners that operate on renewable energy won't be impacted.
What Is Cryptocurrency Mining?
Cryptocurrency mining is a digital process of tracking and processing new cryptocurrency transactions. Bitcoin and similar currencies often rely on proof-of-work (PoW), where computers known as miners compete against each other to process the next group of transactions, known as a block.
This competition requires intensive computer calculations that consume a lot of electricity. For comparison, Bitcoin alone uses more energy than many countries.
According to Cambridge Bitcoin Electricity Consumption Index, if the Bitcoin network were a country, it would rank 34th in the world—right between Pakistan and Kazakhstan—in annual electricity use. China, the United States, and India rank numbers one, two, and three.
Other cryptocurrencies don’t necessarily rely on the same energy-intensive blockchain software. Avalanche, Solana, and Polkadot are competing cryptocurrency networks relying on proof-of-stake (PoS) methods that require far less electricity. PoS miners will not be impacted by this bill.
The currencies that rely on PoW are harmful to the environment when hooked up to coal, natural gas, and other power plants relying on burning carbon fuels. This is where New York is looking to step in and require a change for miners in its jurisdiction.
A New Crypto Mining Moratorium in New York
Cryptocurrency mining can happen on a personal computer at home, a traditional computer data center, or a purpose-built facility. Due to the potential profitability of bitcoin mining, some miners have gone so far as to purchase and reactivate old power plants to power their bitcoin mining without paying standard electricity rates.
What Happens To Crypto Miners in New York?
New York isn’t the first locale to discuss a ban on crypto mining. China effectively banned cryptocurrency mining in a sweeping referendum that had a major impact on cryptocurrency markets. Over time, markets stabilized as miners in other locations took up the slack.
The same may happen in New York if this bill becomes law. Under this law, cryptocurrency mining won’t become fully illegal in New York State as it did in China. But large mining operations may look to move outside of New York borders to a more favorable location.
Individuals running cryptocurrency mining rigs at home may be less likely to land in the crosshairs of law enforcement but continuing to mine using traditional power sources may put some miners on the wrong side of the law. If the law gets signed by the Governor, miners who want to continue to work in the state will need to find a way to comply with the law to avoid prosecution.
How Does Cryptocurrency Mining Work?
Cryptocurrency mining is a distributed process where computers work to process new transactions and keep a copy of all past transactions for verification. The distributed ledger enables a trusted source of information for all global users. When a miner successfully processes a transaction, its owner is awarded a fee, sometimes called gas, and may also earn newly minted currency.
What Is the Difference Between PoW and PoS?
In proof-of-work (PoW), the probability of mining a block is determined by the amount of computational work performed by the miner. While in proof-of-stake (PoS), validating a new block is determined by how many coins a person holds.
Can Governments Outlaw Cryptocurrency?
There is a risk of future legislation that could further limit cryptocurrency mining or put other guardrails on the cryptocurrency industry. Like banking and Wall Street investment brokerages, regulations can shift and evolve. New York is often a leader in financial regulations, so it could signal future shifts in other states.
The Bottom Line
While restrictions on cryptocurrency mining are not ideal for the crypto community, this regulation is a win for environmental advocates in New York. If the law is passed, there’s a good chance some miners will shift to sustainable energy sources, some will move out of state, and some will shut down for good.
Due to the distributed nature of cryptocurrency, the entire ecosystem isn’t being threatened and should only see mild impacts if the law passes. But overall, it shouldn’t derail the cryptocurrency industry beyond a temporary blip on the radar.