New York Legislators Address Crypto Head-On
By Jeremy M. McLaughlin, Christian A. Zazzali, and Josh Durham
On Friday June 3, 2022, New York lawmakers passed two cryptocurrency bills, whose fate now lie in the hands of Gov. Kathy Hochul. Together, they would impose a moratorium on certain cryptocurrency mining operations and establish a cryptocurrency and blockchain task force. If successful, the mining ban would make New York the first state to enact such a moratorium.
The first bill, S.6486D, amends New York’s Environmental Conservation Law so as to not approve any new application of, issue, or renew a permit for carbon-based energy plants supplying energy to “cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions” for two years.
Moreover, it mandates the department of environmental conservation to issue a generic environmental impact statement concerning “cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions.” The statement will address many discrete environmental issues, including the amount and source of energy supplied to mining operations, the emission of accompanying greenhouse gas and other pollutants, public health impacts, and other social and economic costs and benefits. If signed, the department must produce this report within a year after the effective date of this act. Thus far, Gov. Hochul has opted to forego signing the proof-of-work ban, noting “we have a lot of work to do over the next six months.”
This bill follows China’s commitment to ban cryptocurrency mining operations, and the European Union’s attempt to do so. It should be noted that energy-intensive Proof of Work is not the only consensus algorithm. There are several more energy-efficient consensus algorithms like Proof of Stake, which the Ethereum blockchain will soon implement this year following its network upgrade. Lastly, any ban on mining in one jurisdiction will not greatly jeopardize the existence of a blockchain or cryptocurrency altogether, since such mining can continue in other jurisdictions.
The second bill, S.8343, calls for a task force to examine the “effects of the widespread use of cryptocurrencies and other forms of digital currencies and their ancillary systems.” The task force would consist of sixteen members, with a mix of core state regulators, academics, and industry participants.
Importantly, the task force must submit to the governor, by December 15, 2024, a report on various topics regarding the digital assets industry, including: the number of digital currencies and exchanges; impacts on state and local taxes; digital currency investment entities; mining energy consumption; transparency and market manipulation; other states’ and countries’ regulations of the industry; and legislative and regulatory recommendations to increase transparency, security, and consumer protections.
This bill reflects similar initiatives by other states. Both Florida and New Jersey have already established similar task forces to examine the diverse implications of blockchain technology. Such legislative actions are well-founded and prudent, as decision-makers are increasingly acknowledging a potential economic paradigm shift brought about by blockchain technology.
In all, New York’s crypto bills continue the trend of governing bodies closely examining the opportunities and issues surrounding blockchain technology.