New York State Assemblywoman Anna Kelles is fed up with all the fear over the bill she wrote — and sponsored — to impose a two-year moratorium on certain types of new cryptocurrency mines in the state. The fate of the measure, which passed the state Senate in the early hours of Friday morning, rests in the hands of Governor Kathy Hochul, who could sign it or veto it.

“It’s important to understand that this is not a ban,” Kelles said in a call with CNBC on Friday.

“It’s like a three-page bill. So it would be wonderful for people to read it, but it often ends up being an emotion-based interpretation.”

The legislation aims to reduce the state’s carbon footprint by cracking down on crypto mines that meet very specific criteria.

On the one hand, they have to use the energy-intensive proof-of-work authentication method to validate blockchain transactions. Second, they must draw electricity from power plants that burn fossil fuels. Within this subcategory of mines, the measure only applies to those seeking to extend or renew their permits, while new entrants would not be allowed to log on.

Proof-of-work mining, which requires sophisticated equipment and a lot of electricity, is practically synonymous with bitcoin. Ethereum is moving to a less energy-intensive process, but will still use this method for at least a few more months.

“If there’s a cryptocurrency mining operation, like there’s one in Syracuse, where there are thousands of cryptocurrency mining computer processors, and they’re tied directly to the network: it’s not a moratorium on this installation,” explained Kelles, who revealed to CNBC that she doesn’t own any cryptocurrency but is actively researching the sector.

Also, it won’t affect existing powerhouse operations because it’s not retroactive, nor will it impact “small scale cryptocurrency miners who are doing, you know , four, five, ten, twenty computers in their basement”. she says.

Kelles says his bill is essentially just a big pause button, designed to halt the actions of a corner of the state’s crypto mining industry running on coal and natural gas power plants. These energy sources interfere with the state’s aggressive climate laws that require it to become neutral in its greenhouse gas emissions by 2050.

“This is very narrow, and it will in no way affect anyone’s ability to buy, use, sell, or invest in any cryptocurrency, including any cryptocurrency based on proof-of-work methods like bitcoin,” Kelles continued.

The crypto mining industry has banded together to challenge the law.

Miners tell CNBC that while this bill is relatively narrow, they are concerned about the possibility of regulatory creep.

“A moratorium and a ban on how a miner gets its energy – behind the meter versus the grid – is not miner hospitable,” said Marathon Digital’s Fred Thiel.

“New York has a grid congestion problem that is not impacted at all by energy consumption behind the meter,” Thiel continued. “Ultimately, this sends a message to miners to stay away from New York, as these are just the first steps in what could become a total ban on mining in the state. .”

Miners make large capital investments that can take up to five years to provide a return on investment, plus a return on investment. Thiel says no company is willing to risk investing in a state where, after two years or sooner, it might be forced to close and relocate.

Kelles tells CNBC that crypto miners challenging the bill are a lot like the oil and gas industry. She says both use lines such as “If you do this, in the future it will put a damper on free trade and free trade – and all regulation is bad”.

She also isn’t worried about crypto miners leaving New York, because ultimately, like any business, their interest is profit.

Large-scale miners compete in a low-margin industry where their only variable cost is usually energy, so they have an incentive to migrate to the cheapest energy sources in the world, which also tend to be renewable . New York is a bastion of cheap, renewable energy, which is a big draw for industry.

One-third of New York state’s generation comes from renewables, according to the latest available data from the US Energy Information Administration, and the state produces more hydroelectric power than any other state east of the Rockies. .

“The oldest and largest cryptocurrency mining operation in the country is in New York State, and it’s all hydroelectric. Hydroelectricity can’t be picked up and moved,” said Kelles, who has also noted that hydroelectricity is the cheapest form of renewable energy. .

Additionally, the state has a cold climate, which means less power is needed to cool the computer banks used in crypto mining. New York also has a lot of abandoned industrial infrastructure that is ready for repurposing as well.

“To say that miners can pick up and go and go into any state and have access to this form of energy…I think it’s alarmist to say that,” Kelles said.

However, some data suggests miners began leaving New York for more politically friendly jurisdictions like Wyoming and Texas last year, ahead of the expected crackdown. Data from digital currency firm Foundry shows that New York’s share of the bitcoin mining network fell from 20% to 10% between October 2021 and the end of January.

“Our clients are afraid to invest in New York State,” said Kevin Zhang of crypto mining pool Foundry.

“Even of Foundry’s deployments of $500 million in capital for mining equipment, less than 5% went to New York due to the hostile political landscape,” Zhang continued.

The real sticking point of the legislation comes down to who to regulate: proof-of-work cryptocurrency miners or power generators.

“This is a two-year moratorium on the use of power plants,” Kelles said. “Some of my colleagues say, ‘You know, it’s really a power plant bill. “”

This logic irritates some crypto miners.

“If it was just about relighting coal-fired power plants, it would be much easier — and fairer — to simply ban relighting coal-fired power stations,” Thiel said. “Problem solved.”

Some of the biggest names in bitcoin — including Jack Dorsey, Tom Lee, Nic Carter and Michael Saylor – recently co-signed a letter to the Environmental Protection Agency in which they took issue with congressional Democrats confusing data centers with data production facilities. ‘electricity. The issue was entirely separate from New York’s moratorium bill, but the same reasoning applies.

The rebuttal letter states that data centers that contain “miners” are no different from data centers owned and operated by Amazon, Apple, Google, Meta and Microsoft. According to the letter, each is just a building in which electricity powers computer equipment to operate. IT workloads.

“Regulating what data centers allow their computers to do would be a dramatic change in policy in the United States,” the letter read.

Kelles says New York’s bill doesn’t distinguish crypto miners from other big energy consumers – it’s just that “there aren’t other energy consumers buying power plants “.

“It’s not about the industry, it’s about the use of power plants,” she said.

But Castle Island Venture is Nic Carter does the case that New York “now regulates data center content” and has effectively “banned some kind of computing”.

“They directly control what constitutes valid use of power,” Carter wrote in a tweet.

Kelles says the key here is to make sure the state doesn’t make emotional or political decisions. She says that’s why the second half of the bill, which requires the state government to assess the impact of the industry, is the most important part of it.

“Our scientific and environmental experts will collect data on the impact of industry on our ability to achieve our CLCPA goals,” she said, referring to the Climate Leadership and Community Protection Act. The CLCPA is “one of the most ambitious climate laws in the world” and requires New York to reduce economy-wide greenhouse gas emissions by 40% by 2030 and no less than 85 % by 2050 (relative to 1990 levels).

Kelles says the two-year moratorium on buying fossil fuel power plants in New York will give scientists and experts at the Department of Environmental Conservation the time they need to write an environmental impact statement. complete and transparent.

“The charge for them, as stated in the bill, is to assess the impact of the cryptocurrency mining industry on our ability to achieve our CLCPA goals,” Kelles continued.

It’s unclear whether the survey will also examine ways in which proof-of-work miners could contribute to network resilience and encourage the construction of renewable infrastructure.

Texas, for example, served as a case study of how bitcoin mining can help stabilize power grids by ensuring demand always equals supply.

Bitcoin miners have also improved the economics of renewable energy. When these power buyers co-locate with renewables, it creates a financial incentive to build and improves the basic economics of renewable power generation, which has been fraught with volatility.