New York Bill Would Restrain Cryptocurrency Mining Operations Over Environmental Concerns

The New York legislature on June 2 passed a bill aimed to stop cryptocurrency mining operations that use fossil fuels to power their facilities. The bill would amend the existing Environment Conservation Law to ban operations that use “proof-of-work authentication” methods to validate blockchain transactions.

Proof-of-work authentication methods refer to consensus algorithm in a block-chain network used to validate a cryptocurrency transaction, with competitors completing new blocks, and algorithms changing the complexity of the competition, thereby resulting in increased energy usage. The bill notes that operations which use such methods are an expanding industry, and the increasing energy usage would impact compliance with the Climate Leadership and Community Protection Act of 2019. Under the law, New York must reduce economywide greenhouse gas emissions 40 percent by 2030 and 85 percent by 2050 from 1990 levels, and attain a carbon-free power system by 2040.

The bill would establish a two-year ban on the approval of applications or issuance of new permits for a fossil fuel-based electric generating facility designed to support cryptocurrency mining operations. Renewal of permits for existing facilities that serve the purpose would also be prohibited.

Further, the Department of Environmental Conservation would be required to prepare a generic environmental impact statement on cryptocurrency mining operations that use proof-of-work authentication methods.

If Governor Kathy Hochul signs the legislation, New York will become the first state to restrict cryptocurrency mining over concerns of its environmental impact.