Suggested Bitcoin Mining Ban is a bad idea

New York City Mayor Eric Adams is right – the bitcoin mining moratorium is a bad idea, says Patricia Trompeter, CEO of Sphere 3D.

As you read this, New York Governor Kathy Hochul may have already signed a bill banning new bitcoin mining licenses in the state for two years. As I write this, the controversial bill, which was just passed in the State House, is in limbo, awaiting Hochul’s signature.

A handful of upstate politicians threatened to oppose Hochul’s election bid if she did not sign the bill. Meanwhile, New York City Mayor Eric Adams, who is famously bullish on crypto, urged the governor to veto the bill.

Mayor Adams is right. The Bitcoin mining moratorium is a bad idea, and Governor Hochul should not sign it. The bill’s apparent goal, to reduce energy consumption and greenhouse gas emissions, is critically important. But the proposed legislation would completely fail to advance these goals.

The mining moratorium would also have a negative impact on Empire State jobs and damage the state’s reputation for innovation and fintech leadership.

Instead, lawmakers should consider other options that will provide incentives for more sustainable bitcoin mining to protect both the environment and valuable jobs. More on that in a moment, but first, let’s back up and investigate the reasons why we’re in this situation.

New York: Why Some Lawmakers Are Targeting Bitcoin Mining

To understand how we got here, it is important to acknowledge the ignorance of the subject on a galactic scale among some of the people who are in a position to regulate cryptocurrencies and related activities such as bitcoin mining. Not only do some decision makers lack a solid understanding of crypto mining issues, but they have a thunderous notion of cryptocurrencies generally.

For example, some politicians have speculated that since “crypto” means “hidden” and “currency” means “money”, cryptocurrencies must exist to hide money made from illegal activities. The reality: Blockchains keep an indelible ledger of transactions, while criminals are routinely overflowing with stacks of untraceable paper currency issued by the US Treasury Department.

That leap in logic was a real one “tell me you do not know anything about crypto without saying “I know nothing about crypto” moment. Fortunately, this level of bearing is not universally shared among legislators, many of whom is well informed. But that’s a problem.

Regarding the New York mining moratorium specifically, the problem may be due to a misunderstanding of how much energy the mining process uses and its greenhouse gas impact. Bitcoin accounts for only 0.23% of total energy consumption, and data centers less than 2% of kilowatt-hours in the United States

This is not to say that the energy consumption for crypto mining is not worth addressing – it is. But it is a kind of greenwashing to claim that a mining ban will seriously address climate issues when transportation accounts for 27% of US greenhouse gas emissions. Nobody is proposing to close LaGuardia or JFK. Bitcoin mining is not well understood, so it is a simple goal.

Why bans are the wrong approach

A ban like the one currently sitting on Governor Hochul’s desk is the wrong approach for two simple reasons: It will not work and it will cause harm. If the governor signs it, companies planning to open in New York will simply open in another region, and take potential jobs out of the state.

Not only would these jobs be lost to another state, the energy consumption and emissions that the ban is supposed to stop will still occur. Tackling climate change requires collective action, so it is useless to push companies out of New York to consume energy elsewhere. The ban will not cut total energy consumption, but it will drive sources of revenue for clean energy infrastructure out of the state.

Let’s keep in mind that bitcoin miners can be good corporate citizens. New York lawmakers should look north to Canada for an example. Jaime Leverton is the CEO of Hut 8 Mining Corp., one of North America’s largest mining companies. She and her team work closely with City of Medicine Hat officials to strengthen the local economy and protect the environment.

What legislators can do instead

As CEO of a Nasdaq-listed, net carbon-neutral crypto-mining company (not located in New York), I am generally not in favor of further regulation since it is contrary to the industry’s decentralization ethos. But lawmakers who are informed about the industry and clear-sighted about their goals can develop well-thought-out proposals, such as the two-part framework created by Senators Gillibrand (D-NY) and Lummis (R-WY).

Also, there is a lot legislators can do outside of a regulatory framework to achieve the stated goal of the New York bitcoin mining moratorium. Incentives to promote the use of renewable energy can make a real difference by reducing the need for sustainability-conscious crypto miners to use carbon compensation while extracting energy from coal-fired power plants.

Providing incentives to create more green host facilities is an effective strategy to reduce the environmental impact of mining and other network activities.

We should encourage industry organizations to work for more sustainable operations. The signatories of the Crypto Climate Accord (CCA) promised to reach carbon-zero zero operations by 2040, but there is no straightforward way without clearer green mining standards.

New York Mining Bill: It’s time for leaders to stand up and be heard

Regardless of the fate of New York’s bitcoin mining account, we must continue to address the impact of cryptocurrency on climate change. As small as its environmental impact is in relation to industries such as transport, the crypto sector has a responsibility to reduce its carbon footprint, and many industry leaders embrace this commitment.

There are ways to achieve sustainability without forcing businesses to relocate, stifle innovation and deprive communities of revenue and economic opportunities. Crypto-mining companies can be allies, contribute funds to much-needed infrastructure and education in local communities while creating jobs.

A mining ban of the type proposed in New York is a lazy reaction. We need leaders in the public and private sectors who understand the industry to seek real solutions through collaboration – now is the time for these leaders to stand up and be heard.

About the author

Patricia Trompeter is the CEO of Sphere 3D Corp., a net carbon-neutral cryptocurrency miner. During his 15+ years of leading business restructuring and turnaround operations for GE Capital, Patti gathered significant expertise in optimizing operating systems and driving company growth. As the first female minority leader in a crypto-mining company, she is passionate about being a mentor and role model for female minority-owned companies and hopes to inspire girls and women to pursue leading roles in all industries.

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