This article first appeared in New York Focus, a website that features investigative reporting on New York State issues.
Following a surge in power-hungry Bitcoin mining that set environmentalists scrambling, New York lawmakers have introduced multiple bills regulating cryptocurrencies late this legislative session.
Anna Kelles (D-Ithaca), a first-term Assemblymember from the Finger Lakes, is leading the charge with her push for a three-year state moratorium on energy-intensive digital asset mining.
The proposed halt follows a flurry of media coverage, touched off by a New York Focus investigation, of a Bitcoin mining operation at a gas-fired power plant on Seneca Lake. The Connecticut private equity firm that restarted the once-mothballed plant in 2017 has touted plans to ramp up its energy consumption.
Environmentalists warn that dozens of other aging plants could follow on the heels of Greenidge Generation Holdings by converting to data centers to reap huge mining profits. Such a trend would spike energy generation and torpedo New York’s ambitious plans to cut greenhouse gas emissions, they say.
With the Legislative session set to end June 10, Kelles is still finalizing the language for her bill and an identical Senate version carried by Sen. Kevin Parker (D-Brooklyn).
“The bill I’m creating actually supports cryptocurrency, as long as it doesn’t counter our efforts to reach state emissions reduction targets,” she told New York Focus.
But proponents of the moratorium worry that it could encounter opposition from finance firms, which have recently amassed large stakes in cryptocurrencies—including one hedge fund, founded by a major New York Democratic party benefactor, which is set to be a major shareholder of Greenidge.
‘They’ll Probably Try to Kill It’
The push to regulate digital assets in New York comes amid a broader regulatory crackdown. Last month, China sharply curtailed its world-leading crypto mining sector, due to concerns about both fossil fuel energy use and air pollution—the same issues that make New York lawmakers wary of the practice. And in the wake of a recent cyberattack on the Colonial Pipeline that led to a ransom payment in bitcoin, the Biden Administration is weighing a range of new crypto regulations.
Miners of Bitcoin and other digital tokens use hundreds of specialized computers, known as “rigs,” to verify transactions and earn new coins.
Many cryptocurrencies, including Bitcoin, rely on a particularly energy-intensive method of authenticating transactions, which is known as “proof-of-work.” Kelles says proof-of-work operations — not all cryptocurrencies — need to be stopped, or at least paused.
Kelles says her bill is intended to be surgical, discriminating among cryptocurrencies based on their carbon footprint. That leaves maneuvering room for companies like Ethereum, which is working on a low-energy authentication method for its coin, Ether, Bitcoin’s chief rival.
But her legislation could find itself in the cross-hairs of financial heavyweights that have placed huge bets on Bitcoin. BlackRock, the world’s largest asset manager, has acquired 16 percent of a company that holds more than $3 billion dollars of Bitcoin on its balance sheet. Morgan Stanley recently bought more than 10 percent of that same company, MicroStrategy.
Long Island-based Renaissance Technologies, the world’s second largest hedge fund, amassed its largest position ever in crypto mining stocks in the first quarter of this year after buying $75 million in shares of Marathon Digital and $62 million of Riot Blockchain.
Greenidge currently owns and runs a 19-megawatt Bitcoin mining operation at its plant in Dresden. It has been telling potential investors that it plans to boost its Bitcoin energy consumption to 85 MW in Dresden…