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New York State moratorium on PoW mining reinvigorates the conversation around crypto industry’s sustainability.
Last week, New York dominated crypto media headlines in very different ways. In New York State, the local Assembly voted in favor of the bill that would ban for two years any new mining operations that rely on proof-of-work (PoW) consensus mechanisms and use fossil fuel-generated energy.
A temporary moratorium, which could be extended after the state’s Department of Environmental Conservation provides its assessments of the industry’s carbon footprint, marks the first major legislative attack on PoW mining on environmental grounds in the United States. The push mobilized the community — after digital asset advocacy groups rang the alarm on Twitter. Then, proponents of the ban had to endure three hours of a heated debate to narrowly pass the draft. There’s hope for an even tighter fight in the NY State Senate.
Meanwhile, New York City Mayor Eric Adams set an example of supporting innovation as he hit out at his state’s BitLicense regime during an interview at the Crypto and Digital Assets Summit in London. As a recently elected politician who’s claimed to take his three paychecks in Bitcoin (BTC), Adams called the license — the only one at the state level — a “high barrier” and urged legislators if not to think outside the box, then to at least not destroy the box itself.
Another instance of a reasonable approach to regulation was exemplified by New York State Senator Kevin Thomas, who has introduced a bill to define, penalize and criminalize fraud specifically targeting developers and projects that intend to dupe crypto investors. The amendment would impose rug pull charges on developers that sell “more than 10% of such tokens within five years from the date of last sale of such tokens.”
A discussion that is here to stay
While some consider New York State’s legislature to be “dominated by radical and fringe elements” who are “ignorant to a new and innovative sector of finance and technology,” the proposed PoW moratorium bill might in fact represent a first notable instance of legislative action with regard to crypto mining’s sustainability. The clash over how power-hungry various consensus mechanisms are and whether it is renewable or fossil fuel-generated energy that powers mining operations has been building up for some time on federal and international levels. These battles will definitely intensify in the months and years to come. At the end of the day, it’s not all bad. Some experts consider Albany legislators’ efforts to be a “prudent action” in terms of pushing the miners toward the green shift, even if it could have a cooling effect on their operations at first.
Regulation fest in Latin America
As a major South American jurisdiction, Brazil passed its first bill governing cryptocurrencies in a Senate plenary session. According to the draft, which is still yet to gain approval from the Chamber of Deputies, the executive branch will draft rules for crypto assets and either create a new regulator or crown the Securities and Exchange Commission or the Central Bank of Brazil as a principal regulator for the industry. Panama is already a step ahead, with its own crypto law passing the third and final round of consideration. Now, it is the president’s turn to greenlight the bill. The initiative’s main advocate, congressman Gabriel Silva, believes that the law will “help Panama become a hub of innovation and technology in Latin America.” Meanwhile, Cuba is expected to begin to issue virtual asset service provider licenses starting May 16.
CFTC gains momentum
The United States Commodity Futures Trading Commission, one of the main power centers in the crowded U.S. crypto regulation scheme, seems to have gotten some extra points in the race. A bipartisan group of lawmakers re-introduced the Digital Commodity Exchange Act, which would bring cryptocurrency developers, dealers, exchanges and stablecoin providers under the purview of the CFTC. Granted, the mandate would extend only to cryptocurrencies deemed to be commodities, while the U.S. Securities and Exchange Commission would still hold power over the digital asset securities offerings. Well-received by the crypto community, the bill should make it through the first hearing by the U.S. House Agriculture Committee first.
Hey everyone, and welcome back to Chain Reaction In our Chain Reaction podcast this week, Anita and I chatted with Sequoia Capital’s Shaun Maguire on …
“We have to continue to be competitive” the mayor said in a keynote interview at a London crypto conference where he suggested scrapping the states’ BitLicensing requirement.
New York City Mayor Eric Adams has hit out at his states’ BitLicensing regime, claiming that it stifles innovation and economic growth.
In a closing keynote interview at the Crypto and Digital Assets Summit in London on April 27, Adams suggested his state legislature counterparts in Albany “listen to those who are in the industry” adding:
“It’s about thinking not only outside the box, but on this one, we may have to destroy the box.”
Adams is a crypto advocate who ran for mayor planning to turn New York City into the “center of the cryptocurrency industry” and took his first three paychecks in Bitcoin (BTC). In the interview he said cryptocurrencies and blockchain technology are the “next chapters in the future” and the opportunity shouldn’t be squandered.
“New York State is the only state to require a license for crypto companies. That’s a high barrier, and it just makes us less competitive. We have to continue to be competitive.”
Since 2015, any “virtual currency business” wishing to offer services within New York requires a BitLicense to do so. According to the states’ Department of Financial Services (DFS) the license ensures that its residents have a “well-regulated way to access the virtual currency marketplace” and that the state remains at the “center of technological innovation and forward-looking regulation”.
Many crypto firms moved from New York when the license was introduced and recent calls to remove regulatory barriers and ease restrictions often focus on the license, which costs $5,000 in application fees along with unclear capital requirements set by the DFS.
In the state capital, lawmakers take an altogether stricter regulatory approach to the cryptocurrency industry than Adams would. On Tuesday the New York State Assembly passed a bill to the Senate which would place a two-year ban all on all new proof-of-work (PoW) cryptocurrency mining facilities using carbon energy.
On April 9 Governor Kathy Hochul signed into law a requirement that BitLicensed firms must pay assessment fees to cover the cost of regulatory operating expenses incurred by the DFS, placing possibly tens of thousands of dollars a year extra in fees on firms.
“It is imperative that we work with the state lawmakers and regulators,” Adams said “I’m really happy to see Governor Hochul is leaning into this industry as we examine what are the bureaucratic issues that we need to look at.”
The bill will now be carried with support to the Senate for passing before a final sign-off into law by Governor Hochul.
The New York State Assembly passed a bill late on Tuesday April 26 that would place a two-year ban on all new proof-of-work (PoW) cryptocurrency mining facilities in the state that use a carbon based fuel to power their operations.
The bill sponsored by Anna Kelles would not only impose a two-year hold on approval of any new Bitcoin mines, the proposed moratorium would also prevent the renewal of permits issued to existing PoW cryptocurrency miners using carbon sourced energy if they seek to increase the amount of electricity consumed.
Thrilled that my bill with Senate champion @kevinparkernyc A7389C/S6486D just passed in the Assembly as part of the #EarthDay Package! Thank you to all of cosponsors and advocates who helped get this bill to the floor for a vote! pic.twitter.com/NhVnMo3FJE
— Anna Kelles (@annakelles) April 27, 2022
The bill gathered the support it needed to pass, with 95 in favor, 52 against and will now be carried by Senator Kevin Parker for a vote in the Senate. If successful it will then be delivered to Governor Kathy Hochul who can veto the bill or sign it into law.
The Department of Environmental Conservation (DEC) would be tasked by the bill with preparing a “generic environmental impact statement” to number, locate and asses the energy consumption and greenhouse gas emissions of PoW miners and their impact on the public health.
Cryptocurrency industry advocacy group the Blockchain Association had previously called on “pro-tech, pro-innovation, pro-crypto” residents of New York to mount an opposition to the bill, which they claim resulted in thousands of messages to legislators.
The association said that around three hours of debate took place over the bill, demonstrating what they believe is a “greater opposition to the mining ban than proponents believed.” In a tweet today the team said it will direct its energy to the New York Senate to defeat what it calls the “anti-technology bill”.
Proposed bans on proof-of-work cryptocurrencies on environmental grounds are becoming more common. A similar proposal called the Markets in Crypto Assets (MiCA) bill was narrowly defeated in the European Parliament in late March, with legislators there even considering a ban on Bitcoin trading to enforce the proposed ban on mining.