On June 2, 2022, the New York Senate passed Senate Bill S6486D (the Bill), which would amend the state’s environmental conservation law and set forth a two-year moratorium on certain cryptocurrency mining operations in the state of New York. The Bill passed the New York Assembly earlier in 2022 and now awaits Gov. Kathy Hochul’s signature. If signed, the Bill would prohibit the issuance of permits for certain electric-generating facilities that provide energy for mining operations that use proof-of-work (PoW) authentication methods to validate blockchain transactions. The legislation also would require a comprehensive generic environmental impact statement review by the New York Department of Environmental Conservation in consultation with the state’s Department of Public Service.
Bitcoin mining is a verification process essential to the bitcoin economy; it is the process of creating new bitcoins by solving complex mathematical problems that verify transactions in the cryptocurrency. PoW mining is one of the two most commonplace mechanisms cryptocurrency miners use to verify new transactions on the blockchain and make new tokens. Powerful computers plug into the bitcoin network and solve complex mathematical equations to confirm the legitimacy of bitcoin transactions. As payment for these computations, miners receive new bitcoins as a financial incentive to keep the systems running. By applying PoW techniques, miners ensure the safety of the blockchain by validating the accuracy of transactions, as there is no central authority that protects transaction information.
The Bill would partially limit PoW mining operations in New York for two years. The Bill’s key points include:
A two-year moratorium on approvals of any new or renewed permits for fossil fuel burning plants being used to power behind-the-meter PoW mining, which only targets new operations.
A prohibition on the issuance of new air permits and the renewal of existing air permits, but it would not affect current operating PoW mining operations whose air permits do not require review within the moratorium period.
A study of existing cryptocurrency mining operations and their potential environmental impact in the state by the department of environmental conservation along with the department of public service.
The Bill would not apply to mining operations that utilize energy from the grid or use renewable energy.
To date, Gov. Hochul has not taken action on the Bill and has indicated a decision may not be forthcoming in the coming weeks. Blockchain industry leaders have expressed concerns related to the Bill’s potential economic impacts in New York state. If the governor signs the Bill, New York would be the first state in the country to ban certain blockchain technology infrastructure.
If signed into law, the Bill may have unintended consequences for the industry in New York, as innovators and entrepreneurs may turn their focus to other states that have deregulated power grids and financial incentives. For example, some states are taking steps to incentivize cryptocurrency mining as follows:
In May 2021, Kentucky passed a pair of bills creating tax incentives for crypto mining companies;1
In January 2022, legislation was proposed in Illinois to modify a state law to extend incentives to crypto-mining companies that set up shop in the state;2
In June 2021, Texas Gov. Abbott signed a bill3 into law that puts virtual currency under the Texas commercial law framework as a secured transaction, facilitating business transactions for cryptocurrency companies in Texas; and3
Georgia also has become an attractive state for crypto miners because it offers lower power prices and large amounts of nuclear and solar power.4
1 The Kentucky State House of Representatives “House Bill 230” May 25, 2021, available at: H.R. 230, 21st Reg. Sess. (Ky. 2021); The Kentucky State Senate “Senate Bill 255” May 25, 2021, available at: S. 255, 21st Reg. Sess. (Ky. 2021).
2 The Illinois House of Representatives “House Bill 5287” May 25, 2022, available at: H.R. 5287, 102nd Gen. Ass. (Ill. 2022).
3 The Texas House of Representatives “House Bill 4474” June 15, 2021, available at: H.R. 4474, Reg. Sess. (Tex. 2022).
4 Josh Saul, “America’s Bitcoin Miners See Georgia as the New U.S. Hot Spot,” Bloomberg US Edition (Feb. 7, 2022).
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William B. Mack is part of the firm’s government affairs and financial regulatory and compliance groups. He is experienced in advising companies on regulatory and compliance matters relating to the Securities and Exchange Commission regulations, the Exchange Act, Anti-Money Laundering laws and Financial Industry Regulatory Authority (FINRA) rules.
William’s practice involves all aspects of broker-dealer regulation, including Self-Regulatory Organization (SRO) membership, supervision, employment, research, soft dollar arrangements, chaperoning of…
Samir NeJame heads the New York State Government Law & Policy Practice and represents clients in legislative, regulatory and procurement matters at various levels of government. CEOs of Fortune 500 companies, leaders of civic associations and important non-profit organizations regularly turn to him for his legal counsel and ability to assist their organizations to pursue their business goals through legislative means.
As a former corporation counsel for one of New York’s big five cities, Sam has been retained by many of New York’s…
Marina Olman-Pal advises foreign and U.S. financial institutions on licensing, regulatory and compliance matters. She represents clients before U.S. regulators such as the Federal Reserve, OCC, FDIC, FinCEN, OFAC, Florida Office of Financial Regulation and other supervisory authorities. Marina counsels foreign and U.S. financial institutions on a broad range of issues including the Bank Secrecy Act (BSA), anti-money laundering compliance and Office of Foreign Assets Control (OFAC) sanction programs.
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Steven C. Russo chairs the firm’s New York Environmental Practice. He focuses his practice on environmental law and litigation, environmental permitting, National Environmental Policy Act (NEPA), State Environmental Quality Review Act (SEQRA) review, toxic tort litigation, environmental crimes, Brownfields redevelopment, government, energy and the environmental aspects of land use and real estate law. Steven is equally experienced litigating in federal and state courts, as well as counseling his clients with regard to environmental liability risk and due diligence,…
Claudio J. Arruda advises domestic and international financial services firms and institutions, including banks, broker-dealers, Fintech companies, and investment advisory firms on a broad range of regulatory issues, as well as general corporate matters. He represents these institutions on matters related to the applicability and compliance with state and federal banking, consumer, and securities laws and regulations.
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