Bitcoin miners say NY ban will be ineffective and ‘isolate’ the state

Miners feel that the New York legislature’s efforts to get Bitcoin miners out of their state will backfire in the long run as other states invite miners to help improve their energy grid.

Two Bitcoin miners have told Cointelegraph that if the bill banning Proof-of-Work mining for two years in New York becomes law, it would end up triggering an exodus of mining companies from the state and do little to address the intended goals of the moratorium.

GEM Mining CEO John Warren told Cointelegraph on June 8 that he and other miners now view New York as an unfriendly place where they likely would not want to open up shop.

“Miners won’t consider going there after the ban became part of the discussion.”

Environmental sustainability has been at the heart of the New York state government’s argument against Proof-of-Work (PoW) mining. The controversial mining ban bill would prohibit any new mining operations in the state for the next two years. It would also refuse the renewal of licenses to those who are already operating in the state unless it uses 100% renewable energy.

GEM Mining recently commented that the bill will not only miss its intended target but also discourage new, renewable-based miners from doing business in the state. Warren told Cointelegraph that his operation is already 97% carbon neutral.

“The regulatory environment in New York will not only halt their target...but will also likely discourage new, renewable-based miners from doing business with the state...”

The mining moratorium recently passed in NY. We shared our thoughts with @CNBC https://t.co/2Trotc5bT3
— GEM Mining (@GEM_Mining) June 8, 2022

GEM Mining is a South Carolina-based Bitcoin (BTC) mining operation that contributes 1.92 Exahash per second (EH/s) of hash power to the Bitcoin network as of May.

Similarly, the CEO of Sweden-based White Rock Management digital asset miner Andy Long also feels that Bitcoin mining is “moving in the right direction toward fossil-free energy use,” as he stated in emailed comments to Cointelegraph.

The company boasts 100% dependence on hydroelectric power for its 712 Petahash per second (PH/s) hash power contribution.

Long echoed the idea that the PoW mining freeze “would not have the intended effect and sends the wrong message.”

“We want to see more states and local governments encourage investment rather than stifle growth with prescriptive regulations that would likely be the thin end of the wedge.”

Roughly 10% of the US's hashing power comes from New York according to the Cambridge Bitcoin Electricity Consumption Index (CBECI). This makes it the fourth-biggest producer in the country. As of April, miners indicated in a survey with the Bitcoin Mining Council that about 58% of the energy used for mining is from sustainable sources.

How New York goes, California goes

The bill, should it come into effect, could see an outflow of mining firms from New York into other states just as miners exited China in a rush following its mining ban last year.

However, GEM Mining’s Warren believes the contributions from other states will continue to grow whether the moratorium comes into effect or not, adding that it would probably not cause a domino effect of other bans, except that “how New York goes, Cali goes.”

He added that even if Governor Hochul signs the moratorium into law, “New York’s hashpower would drop anyway as Kentucky, North Carolina, Texas, and other states add new incentives for miners.”

“What you’re seeing throughout the country is a bipartisan support of mining and the jobs that they provide. They add stability to the power grid as well.”

Squaring up to the competition

New York is already losing its competition with states such as Kentucky and Georgia for miners. Georgia is the USA’s top state for hash power. Fortune reported in February that miners may be flocking there for the below-average cost of electricity and the opportunity to offset their emissions with renewable credits. Georgia produces 35.6% of its electricity from nuclear and renewable sources.

Kentucky’s Governor Andy Beshear signed into law last March a tax incentive for Bitcoin miners who set up shop and help support the state’s fledgling renewable energy infrastructure. Kentucky has surpassed New York’s hash power for third place in the union but produces only 6.6% of its electricity from renewable sources.

The controversial mining bill is currently sitting on the desk of New York Governor Kathy Hochul, who has yet to publicly commit to signing the bill. Instead, she noted that her team will be looking “very closely” at the proposal over the next few months.

US Bitcoin miners expanding operations despite price volatility

Coin Telegraph

Some BTC miners in the U.S. expect to double their capacity through 2022 while other global operations have been selling BTC to secure cash reserves.

Crypto mining operations based in the United States are committed to increasing their hash power with more hardware despite Bitcoin’s (BTC) three-month downturn.

The Marathon Digital Holdings and GEM Mining companies in the U.S. told Cointelegraph this week that they each expect the size of their respective operations to grow through 2022 by at least doubling the number of machines at their facilities.

Marathon Digital’s VP of corporate communications Charlie Schumacher told Cointelegraph in an interview that it is moving forward with plans to deploy 199,000 new machines throughout 2022 to secure what is “arguably the future of the global monetary system.”

GEM Mining CEO John Warren said via email that it “plans to have 32,000 miners online by the end of 2022.”

For Marathon, that would be more than a six-time increase in size whereas GEM’s capacity would double if it follows through with its plans.

The fact that miners are expanding their operations comes as somewhat of a surprise. Late last week, concerns were raised about the capital efficiency of miners as it was reported that many were selling off BTC in order to maintain cash reserves. Marathon Digital filed with the SEC to sell up to $750 million worth of its stock on Feb. 13.

However, Schumacher clarified that the company is keeping its options open and “is in a position to better work through capital markets” while it looks for the most economically efficient way towards growth. He said that “filing to shelf doesn’t mean they are necessarily selling. Everything we do is about increasing optionality.” He continued

“We can’t control the price of BTC, but we can control how we react to the market. We believe we are in a position to act opportunistically.”

Warren shares optimism about growing his company’s scale. He told Cointelegraph that GEM has also not sold any BTC to date.

His temperament can be derived in part by the potential capital efficiency provided by newly proposed tax incentives in Illinois and Georgia. If passed, the Illinois bill would offer tax breaks for crypto mining data centers, while Georgia would reduce taxes on electricity used for crypto mining.

Whereas Marathon’s strategy appears to be securing greater sources of revenue, GEM is seeking out ways to reduce expenses. Warren said, “State tax incentives for mining are tremendously beneficial to companies like GEM Mining due to their effects on the cost of energy use.”

“Energy is one of the most significant inputs for mining operations, and tax breaks that exempt the sale or use of electricity can assist with reducing overhead costs and maintaining cash flows.”

Both Schumacher and Warren acknowledged the possibility for turbulence in Bitcoin price over the next coming months. Schumacher would not comment on whether we are entering a “crypto winter”, but made it clear that his company focuses on “decreasing risk and making sure that we can pivot.”

Conversely, Warren commented that we are “more likely in a short-term bearish sentiment within the market.” He concluded by saying

“I anticipate there will be continued investment in bitcoin and the larger crypto space, regardless of short-term volatility.”

GEM mining