The new law also requires the state Department of Environmental Conservation to study the environmental impact of cryptocurrency mining. Part of that study will include the number and location of existing cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions in the state; the total number was not provided in documentation around the law.
Mining cryptocurrency is energy-intensive by design. The famous anonymous 2008 paper that led to the creation of the cryptocurrency Bitcoin outlined the now-outlawed “proof of work” concept that uses so much energy. Bitcoin miners use brute computer force to try to solve difficult algorithms; the work, in essence, creates the value of the currency. Some companies have worked to reduce their use of carbon-based fuel by employing alternative sources, like hydropower, while maintaining the core trust that mining instills in a coin. This is in direct contrast with a token like FTX’s FTT, which was created by the now-bankrupt exchange as a way to reward users but whose value was not transparent.
The law is not the first piece of regulation that the cryptocurrency industry considers hostile to its growth.
In 2015, the Department of Finance created a regulatory framework called BitLicense which requires companies who receive, transmit, store, control, buy, sell, exchange or administer virtual currencies to hold a state-issued license or a charter under the New York Banking Law.
“All the companies got chased out because of the BitLicense,” said Nick Spanos, who co-founded a decentralized exchange called the Bitcoin Center NYC in 2013 and now works as an advocate for decentralization in cryptocurrency.
As a result, although the number of companies in the crypto industry tripled in the five years between 2016 and 2021, most of the New York firms in the sector operate at least one level away from the direct creation of new cryptocurrency coins. Instead, many build software that operates on top of the blockchain, for example, which does not require a BitLicense. As of July, only 31 state companies hold BitLicenses, including Coinbase, Genesis Global Trading and Robinhood Crypto.
Mining does not require a BitLicense.
In New York City earlier the same day that Gov. Hochul signed the moratorium, Mayor Eric Adam–who has praised cryptocurrency and even took his first two paychecks in office in bitcoin and ether–said he still believed in the future of crypto.
“This is an industry that we must embrace,” he told reporters at a press conference.
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