Governor Kathy Hochul has signed a two-year moratorium on proof-of-work (PoW) crypto mining. The bill will prohibit the licensing of new and existing crypto mining companies in the state unless they comply with climate regulations.
New York Governor Kathy Hochul has signed one of the most restrictive crypto regulations into law, making the state the first in the United States to put a ban on all new crypto mining operations.
The proof-of-work (PoW) moratorium signed by the governor on November 22nd kickstarted a two-year prohibition on issuing licenses for new mining companies and renewals of existing miners in the state. Only mining facilities that use 100% renewable energy will be allowed to operate in New York from here on.
The notion to allow or ban PoW crypto mining has been a hot take on the industry. Climate activists claim that the model has a larger carbon footprint due to its high consumption of fossil fuel-derived energy. Mining companies are required to power thousands of computers in order to validate transactions on a PoW blockchain like Bitcoin (BTC). Rewards earned from validating transactions is what generate revenue for miners. Environmentalists argue that the excess energy generated from creating blocks is never reused, thus causing harm to the planet.
The PoW moratorium, first passed by the State Assembly in April and the State Senate in June is an amendment to the ‘Climate Leadership and Community Protection Act 2019’, which is focused on reducing 40% of New York’s greenhouse gas emissions by 2030. The bill’s sponsors say that the only thing standing in the way of the state achieving its climate goals is PoW mining.
“I will ensure that New York continues to be the center of financial innovation, while also taking important steps to prioritize the protection of the environment. It is the first of its kind in the country and a key step for New York as we work to address the global climate crisis,” said Governor Andrew Hochul in a memo issued after signing the moratorium into law.
However, the crypto community and advocacy groups allege that authorities and climate activists are spreading false narratives about PoW mining. A survey conducted by the Bitcoin Mining Council (BMC) – a group of 44 Bitcoin mining companies that represent half of the global Bitcoin network, showed a nearly 60% year-on-year rise in usage of sustainable energy in Bitcoin and PoW crypto mining.
Blockchain advocacy group Chamber of Digital Commerce has called out New York’s decision to ban PoW mining by claiming that the state is being unfair to the industry and singling it out from other sectors that consume way more energy.
“The PoW mining industry has been spurring economic growth, job creation, and inclusion for historically underrepresented populations in New York, while also creating financial incentives for the buildout of renewable energy infrastructure.
With this legislation becoming law, we expect the mining companies, or those considering business in the state, to leave and head to more friendly regulatory jurisdictions in the U.S – a trend far too many industries in the New York State are realizing daily,” commented BMC in a twitter thread.
After China banned Bitcoin and crypto mining last year, many companies found refuge in the United States, especially in New York and Texas, making the states some of the largest crypto mining hubs in the world. Miners were attracted to New York mainly due to its low energy costs and its colder weather, which increased productivity. The U.S. is currently the global leader in Bitcoin mining, accounting for 38% of the blockchain network’s overall mining power.
In the past year, the proof-of-stake (PoS) model of crypto mining has been gaining prominence. Projects like Cardano (ADA), Ripple (XRP), and now Ethereum (ETH) all use the consensus mechanism to validate transactions and issue tokens on their networks. PoS is considered more eco-friendly due to it consuming less energy compared to PoW and being able to process faster and cheaper transactions while making the blockchain highly scalable.
Lawmakers are siding with climate activists and proponents of PoS mining in their movement to phase out PoW from the industry. Last year, Ripple co-founder Chris Larsen started a campaign to change the code of Bitcoin and turn it into a PoS blockchain which has seen major backlash from pro-crypto advocates and Bitcoin maximalists. At this year’s COP27 climate summit, blockchain software company ConsenSys announced the ‘Ethereum Climate Platform’, a program to mitigate carbon emissions made by Ethereum before it transitioned from PoW to a PoS model.
Similar to New York’s PoW moratorium, policymakers had proposed a regulation to ban Bitcoin and PoW mining across Europe in the Market in Crypto Assets (MiCA) bill. However, the proposal failed to gain enough support and had to be omitted from the final draft. The MiCA regulation awaiting parliamentary approval is expected to become law by 2024.
At the time of writing, BTC is trading at $16,646, up by 1.46% in the last 24 hours.