States debate whether to restrict — or invite — crypto mining

Last year, New York became the first state to limit cryptocurrency mining based on energy use. Lawmakers approved a two-year moratorium on new mining operations that use electricity supplied directly from fossil fuel plants. The bill was written in response to mining companies reusing aging coal and gas plants 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. "That's an important question."

The measure also mandated a study, conducted by the New York Department of Environmental Conservation, to analyze the environmental impacts of the industry. Kelles said he will examine air and water pollution, as well as the potential for cryptocurrency mining to divert renewable energy resources from existing demands and increase strain on the state's transmission infrastructure. The study could guide future legislation and regulation, he said.

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

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

Mining operations require powerful computers, often in specialized facilities that use large amounts of electricity. Last year, the Biden administration released a fact sheet estimating that cryptocurrency consumes between 0.9% and 1.7% of the country's electricity use. The industry's rapid growth, the White House said, "could hamper broader efforts to meet US 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 Republican State Representative Phil Christofanelli 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 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 awaits a House hearing, would ban zoning restrictions targeting cryptocurrency miners. It would also direct the state Public Utilities 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 that 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 will happen, maybe not, but why don't we open the door and see?"

While some see the economic potential of cryptocurrencies as promising, others think that their growth could slow the path to achieving states' clean energy goals.

“There are so many green electrons right now,” said Mandy DeRoche, deputy managing 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 rates in areas that have 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 its operations could be an asset, rather than a liability, to the power grid. They claim that cryptocurrency mining operations will create demand that will help developers build more wind and solar power, creating a key “buy” for that power when generation exceeds demand from homes and businesses.

"It's an alternative funding stream for these companies, so they will be incentivized to develop clean renewable energy," said Tom Mapes, director of energy policy at the Digital Chamber of Commerce, a blockchain advocacy group. "In areas where there is excess power capacity, this really fits the bill."