A first-of-its kind statewide moratorium on energy-intensive cryptocurrency mining, signed by Governor Hochul last week, is putting the Empire State at the forefront of the growing environmental backlash against the industry.

The law, spearheaded by a state assemblywoman, Anna Kelles, establishes a two-year moratorium on new and renewed permits for proof-of-work cryptomining operations housed at fossil fuel plants.

Cryptomining is the name given to the process by which new cryptocurrency tokens, like Bitcoin or Ethereum, are generated by verifying and recording transactions on the blockchains that are the backbone of the technology. 

Proof-of-work cryptoming has come under increased scrutiny over the past year because of its high energy consumption, especially as high-profile cryptocurrencies like Ethereum switch to a less energy-intensive proof-of-stake model. Bitcoin relies on a proof-of-work model of mining, and it has shown no signs of switching to proof-of-stake.

Ms. Kelles tells the Sun that the legislation in New York is being closely watched by federal officials concerned with the reopening of dormant fossil fuel plants to facilitate cryptomining. She predicts that New York will be the first of many states to regulate these plants.

“I don’t think that this is a situation where we can expect that New York State will be the only one standing up against the environmental impacts,” Ms. Kelles said.

The senior New York organizer of Food & Water Watch, Eric Weltman, also signaled that the environmental organization would make a concerted effort to pass similar laws in other states.

“We are going to promote what we accomplished here in New York far and wide,” Mr. Weltman told reporters Monday. “We’re going to ensure that this victory is recognized, understood, and emulated in other states and communities across the country.”

There are two power plants operating in New York — the Greenidge Generation facility at Dresden and the Fortistar North Tonawanda plant near Buffalo — that have been reopened to power crypto mining operations.

Both plants are decommissioned peaker plants, meaning that in times of peak electricity demand they sell power back to the grid. Most of the time, however, the electricity they generate is directed at cryptomining.

While new plants would not be allowed to open under the new moratorium, the existing plants will be allowed to continue to operate as long as their current permits are valid.

Greenidge Generation is operating with an air quality permit, though renewal of that permit was denied by the Department of Environmental Conservation in June. The company is allowed to continue operating while its appeal of this decision is pending. The Fortistar plant’s permits are not currently under review.

The two plants have operated in a regulatory gray area over the past year, as neither New York nor most of the state’s affected municipalities have explicit regulations for the generation of electricity specifically for proof-of-work cryptomining plants.

The new law placing a moratorium on cryptomining will also require the state’s Department of Environmental Conservation to conduct an assessment of how cryptoming could affect the state’s ability to meet its climate goals outlined in the Climate Leadership and Community Protection Act.

An owner of Billsboro Winery near Dresden, Vinney Aliperti, said at a press conference Monday that the “Bitcoin mining industry is a huge disrupter” and that the moratorium demonstrates that the state is prioritizing the Finger Lakes’ nearly $5 billion agriculture and tourism industry over the cryptomining operation.

“We hope this action will inspire other states to consider the negative impacts ‘proof-of-work’ mining has on the environment, and how the massive emissions generated are contributing to major disruptions in the agricultural industry,” Mr. Aliperti said.

The concerns among agriculturalists include the effects of air emissions on crops, particularly grapes, in the region, and the effects of hot water from the plant on algal blooms in Seneca Lake. 

While environmentalists, agriculturalists, and some lawmakers in New York are celebrating the moratorium and pushing Ms. Hochul to take further action to shut down the existing plants, cryptocurrency advocates are already looking for alternatives to New York should the regulatory hurdles put up by the state become too onerous.

Greenidge Generation announced in early 2022 that it would be establishing a cryptomining plant at Spartanburg County, South Carolina, where Governor McMaster welcomed the company. Plans do not call for the plant to generate electricity like the New York plant.

“South Carolina is transforming into a hub for tech-focused companies, and we welcome Greenidge Generation to our growing roster of innovative companies,” Mr. McMaster said.

Other states, like Kentucky, have established tax incentives to attract investments from the cryptocurrency industry. The Bluegrass State now allows cryptocurrency businesses to have their state sales tax waived if they invest more than $1 million in the state.

Critics of the use of recommissioned fossil fuel plants to mine cryptocurrency argue that the environmental damage they bring is ultimately not worth it for the surrounding communities because the plants generate a comparatively small number of jobs.

The Greenidge Plant, for example, employed 48 people, and the plant planned in South Carolina will employ 40, according to the company. 

Aside from the creation of jobs, the main argument in favor of these operations is that they are profitable enterprises that can benefit private investors. Fortistar is owned by a private investment firm and Greenidge Generation is publicly traded and mostly owned by institutional investors.

A recent downtown in the cryptocurrency markets, however, has made the promise of profitability from such enterprises less assured than previously.

Despite mining more than 100 more Bitcoins in the third quarter of 2022 compared to the third quarter of 2021, Greenidge Generation posted a net loss of $23.1 million. The company has also seen its stock price plummet over the past year, falling to $0.59 per share from more than $17 at the beginning of the year.

Correction: Eric Weltman is the senior New York organizer of Food & Water Watch. Earlier versions of this article included an incorrect name as well as an incorrect title and organization identification.