The cryptocurrency mining moratorium makes New York the first company to regulate the industry

The new law also requires the state Department of Environmental Conservation to investigate the environmental impact of cryptocurrency mining. Part of this study will include the number and location of existing cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions in the state; The total number was not specified in the law’s documentation.

Cryptocurrency mining is inherently energy intensive. The famous 2008 anonymous paper that led to the creation of the cryptocurrency Bitcoin outlined the now-banned “proof-of-work” concept that consumes so much energy. Bitcoin miners use raw computing power to try to solve difficult algorithms; the work essentially creates the value of the currency. Some companies have worked to reduce their use of carbon-based fuels by using alternative sources such as hydroelectric power while maintaining the core trust that mining brings to a coin. This is in direct contrast to a token like FTX’s FTT, which was created by the now-bankrupt exchange to reward users, but whose value was not transparent.

The law isn’t the first regulation to deem the cryptocurrency industry anti-growth.

In 2015, the Treasury Department created a regulatory framework called BitLicense, which requires companies that receive, transfer, store, control, buy, sell, exchange, or manage virtual currencies to have a state-issued license or charter under the New York Banking Act.

“All the companies got shooed out because of the BitLicense,” said Nick Spanos, who co-founded a decentralized exchange called Bitcoin Center NYC in 2013 and now works as an advocate for decentralization in cryptocurrency.

Although the number of companies in the crypto industry tripled in the five years between 2016 and 2021, most New York companies in this sector are at least one level away from directly creating new cryptocurrency coins. Instead, many build software that operates on the blockchain, for example, and does not require a BitLicense. As of July, only 31 state-owned companies own bit licenses, including Coinbase, Genesis Global Trading, and Robinhood Crypto.

Mining does not require a BitLicense.

In New York City, earlier on the same day Gov. Hochul signed the moratorium into law, Mayor Eric Adam — who has praised the cryptocurrency and even accepted his first two paychecks in office in bitcoin and ether — said he still believes in the future of crypto.

“This is an industry that we need to embrace,” he told reporters at a news conference.

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