New York State Governor Kathy Hochul on November 22 signed Assembly Bill 7389-C, has officially placed a two-year moratorium on new fossil-fuel proven cryptocurrency mining in the state. For environmentalists and community groups living near existing mines, it was a hard-won victory after two years of advocacy.
There was no guarantee that Hochul would sign the bill. The General Assembly passed it in June, just weeks before Hochul’s primary campaign, funded in part by cryptocurrency interests, would carry him to victory. Signing the bill could mean alienating some voters who believe in the power of Bitcoin. It also could have troubled the PAC, which reportedly spent $1 million to boost Antonio Delgado, a PAC associate funded by Sam Bankman-Fried, the once-respected founder of exploding cryptocurrency exchange FTX.
Hochul won the general election. FTX collapsed after it was discovered that Bankman-Fried’s trading firm was relying heavily on a coin it had invented for users to use on the exchange. As traders rushed to exit FTX, the company suffered a liquidity crunch, then filed for bankruptcy in the public sphere, sending shockwaves through the industry and driving down the value of many cryptocurrencies. Meanwhile, politicians across the country began to distance themselves from Bankman-Fried, pledging to use her campaign donations for philanthropic causes.
Amid a large-scale public reckoning over the security of cryptocurrencies, Hochul has proudly passed legislation that he once kept mum on and that was once vehemently opposed by industry groups like the Blockchain Association.
“The effort that goes into getting this thing [signed into law] it was just Herculean,” said Yvonne Taylor, founder of Seneca Lake Guardian, an environmental advocacy group in New York’s Finger Lakes region that was instrumental in getting the moratorium passed. “We are extremely excited that this could lead to other states following our models, as New York has done in the past.”
The move comes as a perfect storm of circumstances for environmental groups to make their case against proven-work mining. The cryptocurrency industry was responsible for producing 27.4 million tons of excess carbon dioxide between mid-2021 and 2022—three times the emissions of the nation’s largest coal plant, according to a white paper published in September 2022 by the Sierra Club and Earthjustice. there are many. With proof-of-work, this energy waste is not a bug, but a feature: The algorithm requires miners to attack a formula that approximates the number of miners simultaneously, each increasing their chances by putting multiple highly specialized supercomputers to the task. at the same time as possible, thus earning the right to strike a coin. This task could once be done from a laptop, but today, to compete, most reside in large facilities that run 24/7, often networked, sometimes directly connected to power plants.
Regulators are increasingly wary of the energy waste this process requires. In September, the White House Office of Science and Technology Policy released a report urging regulators to intervene, warning that the sector’s energy use, which “ranges beyond the combined annual electricity use of many individual countries,” could interfere with the nation’s climate. goals.
But a number of ideals were once used to justify Bitcoin’s enormous energy use—the power of a decentralized currency that is strengthened by its users and impervious to the actions of a few lone bad actors. After the FTX accident, these values were questioned.
“This is certainly a wake-up call for the industry” Rolf Skar, special projects manager at Greenpeace, said he helped oversee the group’s involvement in the Change the Code, Not the Climate campaign, an initiative calling for Bitcoin to abandon its proof-of-work model. “I think we’re seeing both politicians and people in industry agree that more regulation is needed.
“A lot of it now is about consumer protection,” he said. “What can get lost in the mix is the impact on communities and the climate.”
Eric Weltman, chief organizer of Food and Water Watch, a nonprofit environmental advocacy group, hopes to make sure the message is not missed at this opportune moment. Instead, he hopes to see local coalitions use the political mood to rally support for similar legislation in other states. “The environmental movement is not necessarily anti-cryptocurrency,” he said. “But we will take advantage of the circumstances created by the accident.”
Organizers in New York state are already working to replicate New York’s bill elsewhere. Taylor has partnered with a coalition of activists in other states around similar battles — especially states with lax regulations like Texas and Kentucky.
“Now we can lead by example,” he said. “We have several legislators who are looking at this seriously.”
It just got a little easier to lead by example. Taylor said he often has to counter the controversy surrounding Bitcoin’s job offers with arguments about how the cryptocurrency’s environmental damage will destroy existing jobs in larger industries like wine and agriculture. Notably, he said a controversial fossil-fueled Bitcoin operation in his community using the once-defunct Greenidge Power Station was once promised to bring jobs to the area. These have not been revealed. “It’s only natural that our lawmakers now side with the real business that supports us against this sketchy industry that seems to be doing more harm than good to people,” he said.
Gerald Epstein, professor and co-director of the Institute for Research in Political Economy at the University of Massachusetts Amherst, said the FTX crash gives environmentalists “a very good argument.” “In both states and localities, where there is readiness and momentum for policies to combat climate change, [the fallout of the FTX crash] giving them a really good opening to regulate cryptocurrency.
Epstein, a political economist whose honest opinions examine Bitcoin’s environmental impact, questions whether the work is worth it at all, whether the result is a highly volatile currency that, according to a recent working paper, is “power-hungry by nature.”
“I’m used to all kinds of financial hocus pocus leading to financial instability,” Epstein told The Daily Beast. “However, very few of them have a serious negative impact on society, the real economy, and the environment.”
Advocates like Taylor have long held similar sentiments, but it has taken time to gather political support. Sen. Elizabeth Warren (D-MA) has warned of both environmental and economic risks: In July, she called on regulators to require cryptocurrency transactions to disclose their emissions, and recently called on financial services corporations. Given the risk Bitcoin’s volatility poses to everyday investors who don’t have the savvy to understand what they’re getting into, the loyalty of taking it out of its suite of retirement savings offerings. The collapse of FTX, he he tweeted On Nov. 9, it “shows how much smoke and mirrors the industry looks like.”
Politicians today echo a similar sentiment—even if they still struggle to figure out how to act. Congress plans to hold a series of hearings to discuss appropriate responses following the cryptocurrency crash. At a Dec. 1 meeting, Commodity Futures Trading Commission Chairman Rostin Behnam urged Congress to give his agency more regulatory authority. (However, it should be noted that a bipartisan bill that would do this was sponsored by Sam Bankman-Fried himself, and his opinion was included. He later told Vox that it was “just PR.” “Wrong regulators,” he said. Everything else is bad.”)
“The FTX collapse is a Lehman Brothers moment,” said Scott Faber, senior vice president of government affairs at the Environmental Working Group, a Greenpeace partner. Change the code campaign. “Prior to the collapse of FTX, I think it was difficult for Congress to regulate and regulate cryptocurrencies.
“Governor Hochul has taken an important first step and I think state and regional energy regulators are taking a serious look at these nonessential wasteful uses of electricity,” he said. “The real debate right now is not whether cryptocurrency will be regulated, but by which agency.”
Groups arguing for stricter environmental regulations must now decide where to focus their attention: the federal government, which could adopt broader regulations, or a number of states and municipalities that are closely affected by cryptocurrency. While some environmentalists are hedging their bets one way or the other, others like Faber argue that it’s not just any scenario; it’s both / both. .
But Mandy DeRoche, deputy managing attorney for the Clean Energy program at environmental law firm Earthjustice, noted that all of these approaches are covered by a more complex political map at the local level. As New York enacts tougher regulations on the industry, signaling miners and financial services companies could potentially look to relocate, lawmakers in states such as Georgia, North Carolina and Illinois have introduced laws to welcome miners with open arms.
DeRoche said it is difficult to find a state with both the political will to ban the most energy-intensive types of cryptocurrency and a sector large enough for those efforts to make a meaningful difference.
New York’s cryptocurrency moratorium was passed in service of its Climate Leadership and Community Protection Act (CLCPA), an emissions reduction law passed in 2019 designed to make the state’s grid 70 percent renewable by 2030. Other states with strong emissions reduction commitments, such as California and New York, lack industry (it was once estimated that the state was responsible for 20 percent of all bitcoins mined). DeRoche said that nations with strong cryptocurrency will want to keep it that way. “We have to think really creatively about what we’re going to do in places like this,” he says, pointing to Kentucky, which offers both low energy rates and tax breaks for cryptocurrencies.
DeRoche noted that New York’s bill was also quite narrow, covering only “behind-the-meter” mining operations that operate by hooking up to a power plant and not connecting to the grid. Cracking down on proof-of-work centers that draw fossil fuel power from the grid could be the next step in jurisdictions that lack widespread behind-the-meter mining, he suggested. States can also issue their own environmental impact studies on cryptocurrency mining, such as New York’s bill requiring completion within a two-year moratorium.
Sklar agrees that the strength in New York’s bill is buying into his campaign to overhaul the most energy-intensive algorithm. After the collapse of FTX, he didn’t sell that cryptocurrency was going anywhere. Neither does Epstein: “These are zombies. They are coming back.”
But Sklar hopes the moratorium will give regulators an opportunity to get their ducks in a row and give the industry a tough look at itself.
“We’re not trying to say that all of this has to go or collapse. I’m not so sure it will happen by itself,” he said. “My hope is that the more it becomes legal, the more it should adopt the standards of other businesses and industries.”