Upstate New York has long been a destination for the crypto mining industry due to the region’s abundance of hydroelectric power, favorable climate for cooling rigs and the cheapest electricity prices in the Northeast.
In recent years, many shuttered power plants with unused electric infrastructure have been converted into mining centers, even before the exodus from China in 2021. However, the industry’s foothold in New York could be coming to an end following a bill that passed early Friday in the New York State Senate.
What happened? While the new legislation is still waiting for the signature of Governor Kathy Hochul, it calls for a two-year moratorium on proof-of-work mining that utilizes energy from carbon-based sources. Proof-of-work is used for validating transactions and mining new tokens, but requires sophisticated gear and a whole lot of electricity. The law would exempt operations that have already secured permits, though new entrants would be barred from coming online and existing licenses wouldn’t be renewed unless the facilities use renewable power.
At issue is New York’s Climate Leadership and Community Protection Act, which requires steep emissions reductions over the next decade. As a result, lawmakers set their sights on energy intensive proof-of-work mining, which has become synonymous with Bitcoin (BTC-USD), though Ethereum (ETH-USD) has also used this method (and will continue to do so for at least another few months). “If it passes, it would make New York the first state in the country to ban blockchain technology infrastructure,” said Perianne Boring, founder and president of the Digital Chamber of Commerce.
Outlook: The latest development could have a domino effect across the U.S., which is at the forefront of the global crypto mining industry. The country accounts for 38% of the world’s miners, and companies may seek to relocate their operations to the less-greener pastures of Kentucky, Georgia and Texas. At the federal level, the Biden administration is formulating its own policy on crypto mining, with recommendations on how to mitigate the sector’s energy consumption due out in September.
Commentary: “It’s like the group is firing rubber bullets at the oil market,” explained Christyan Malek, head of oil and gas equity research at J.P. Morgan. “It’s a cosmetic increase.”
“The U.S. will continue to use all tools at our disposal to address energy prices pressures,” White House Press Secretary Karine Jean-Pierre said in somewhat of a contrast, recognizing OPEC+ chair Saudi Arabia in “achieving this consensus.” The Saudis had previously rebuffed all requests by the U.S. to increase production as the Biden administration approached the royal family at an arm’s length amid strained relations over the war in Yemen and the killing of U.S.-based journalist Jamal Khashoggi. Attempts have been made in recent weeks to repair the longstanding tensions as U.S. gasoline prices hit record highs and President Biden seeks to visit the Kingdom during a trip to the region later this month.
Elsewhere: National Economic Council Deputy Director Bharat Ramamurti revealed that the White House was considering a “windfall” profits tax for U.S. oil and gas producers, following a similar tax announcement in the U.K. and a proposal in the U.S. Senate. However, some strategists caution against taxing “windfall” profits in good times as it could discourage investment in the cyclical energy cycle and intensify prices at the pump. Since Monday, the national average for a gallon of regular gasoline has increased by $0.14 to $4.76, according to motoring group AAA.
