States are debating whether to restrict – or invite – crypto mining

Last year, New York became the first state to restrict cryptocurrency mining based on energy use. Lawmakers passed a two-year moratorium on new mining operations that use electricity directly supplied by fossil fuel plants. The bill was drafted in response to mining companies repurposing aging coal and gas facilities to power their operations.

“Can we meet our climate goals while adding cryptocurrency mining to our network?” asked Assemblywoman Anna Kelles, a Democrat who sponsored the bill. “It’s an important question.”

The measure also commissioned a study, conducted by the New York Department of Environmental Conservation, to look at the industry’s environmental impacts. Kelles said it will investigate air and water pollution, as well as the potential for cryptocurrency mining to divert renewable energy resources from existing demands and increase the load on the state’s transmission infrastructure. The study could guide future legislation and regulation, she said.

Now, some lawmakers in Washington and Oregon want to extend emissions and clean energy standards to cryptocurrency mining that is currently exempt.

Cryptocurrency mining is the process by which bitcoin and other types of digital money verify transactions and generate new coins. “Miners” operate the computers that contribute processing power to a decentralized network that verifies virtual ledgers by solving complex equations generated by the currency’s protocol. The miners who are the first to process these equations are rewarded with newly minted coins, or cryptocurrency.

Mining requires powerful computers, often in specialized facilities that use large amounts of electricity. Last year, the Biden administration published a fact sheet estimating that cryptocurrency consumes 0.9% to 1.7% of the nation’s electricity consumption. The industry’s rapid growth, the White House said, “could potentially hinder broader efforts to achieve U.S. climate commitments to reach net-zero carbon pollution.”

But lawmakers in many states see the industry’s growth as a good thing.

“We need to plant our flag now as a pro-crypto state,” Missouri state Rep. Phil Christofanelli, a Republican, said in an interview with Stateline. “It’s going to continue to grow, and we want Missouri to be open and welcoming to this new form of innovation and industry.”

Christofanelli has sponsored “right to mine” legislation that would prohibit local governments from restricting cryptocurrency mining. The bill would also exempt cryptocurrencies from property taxes and specify that digital currencies do not need the same license required for banks.

The bill, which passed out of committee earlier this month, is similar to measures proposed in Montana and Mississippi this year. The Montana bill, which passed the state Senate last month and is awaiting a House hearing, would ban zoning restrictions that target cryptocurrency miners. It would also require the state Public Service Commission to offer electricity rates to miners that are consistent with other industrial customers.

“We just want to make sure the rules are known and fair, so if companies want to invest in Montana, they know what they are,” said state Sen. Daniel Zolnikov, the Republican who sponsored the bill. “Maybe something big is happening, maybe not, but why shouldn’t we open the door and see?”

While some see promise in the cryptocurrency’s economic potential, others believe its growth could slow the path to meeting the state’s clean energy goals.

“There are just so many green electrons right now,” said Mandy DeRoche, assistant attorney for clean energy at Earthjustice, a nonprofit environmental law group. “We are not going to meet our emissions targets with this additional burden.”

DeRoche raised concerns about electricity prices in areas that need to build new infrastructure to meet the demands of cryptocurrency mining, adding that the jobs created by the industry rarely live up to initial promises.

But industry advocates say their operations can be an asset, rather than a liability, to the electric grid. They argue that cryptocurrency mining will create demand that will help developers build more wind and solar power, creating an important “outlet” for that power when generation exceeds demand from homes and businesses.

“It’s an alternative funding stream for these companies, so they’re going to be incentivized to build out renewable clean energy,” said Tom Mapes, director of energy policy at the Chamber of Digital Commerce, a blockchain advocacy group. “In areas where there is excess energy capacity, this really fits in.”