Regulation
“Right-to-mine” cryptocurrency laws are making their way across the United States
If you drive 45 miles north of Little Rock, Arkansas, you’ll come across a facility filled with thousands of computers trying to “mine” the next bitcoin.
The value of the popular cryptocurrency recently surpassed $60,000 per bitcoin. Mining those bitcoins is a profitable operation, and several cryptocurrency mining companies have moved into the state after the law was passed Arkansas Data Center Law last year, also known as the “right to mine” bill. Similar bills have appeared in a couple of states that protect cryptocurrency mining operations from local regulations.
But it turns out that residents don’t particularly appreciate many of these operations. And Arkansas recently changed course and returned the ability to regulate cryptocurrency miners to municipalities.
Marketplace’s Lily Jamali recently spoke with Gabriel Dance, senior deputy investigative editor at The New York Times, about the cryptocurrency mining situation in Arkansas. He explained what the biggest complaints have been since these mining operations moved in.
The following is an edited transcript of their conversation
Gabriele Danza: The biggest concern I heard specifically in Arkansas – and I also visited mines in Texas and North Dakota – was about noise. It’s probably hard to understand how loud these mines are, but they typically essentially carry crates full of thousands of computers, and each of those computers has a fan. And the fans are whirring, and thousands of these fans working together can create a very loud noise similar to that of an airplane idling. And so that’s the primary concern of many people in Arkansas. I mean, they live mostly in rural communities and they moved to those communities intentionally for the peace and to be away from the busy cities. So for these mines to come in and basically ruin the atmosphere is incredibly destructive not only to the people who live there, but to the wildlife. And even things like hunters are very worried about this. But there are also concerns about rising energy prices, using large amounts of water to cool cars and, yes, the associated pollution. Another thing they’re worried about is who exactly owns all these mines, because they appear to be connected to a network of shell companies, some of which have ties to the Chinese government.
Lily Jamali: I found this very interesting and actually very new regarding your reporting. I hadn’t seen that in many cases it appears that Chinese citizens own and operate these facilities.
Dance: Yes, and not just in Arkansas, but certainly in Arkansas there is this network of shell companies that I described, one of which has direct ties to the Chinese government. And then many of the people involved in that mine appear to have roles in many other mines. But this isn’t just a problem in Arkansas, it’s linked to a greater influx of Chinese property into the United States, some of which has attracted national security attention. For example, an operational mine in Wyoming is located just under a mile away from an Air Force base that controls nuclear-armed intercontinental ballistic missiles. Microsoft, the technology company that operates a data center nearby, sent a report to the U.S. government warning that it could be used for intelligence-gathering operations. Other Chinese-owned bitcoin mines are located directly adjacent to large substations that, if taken offline, could wreak havoc in the areas where they are located.
Jamali: Electrical substations.
Dance: Yes, yes. In all, we identified Chinese-owned or operated bitcoin mines in at least a dozen states.
Jamali: I want to examine the forces behind this legislation that we are seeing in Arkansas and elsewhere. You write that the Satoshi Action Fund helped write these laws. Can you explain what the Satoshi Action Fund is and who is behind it?
Dance: Of course, the Satoshi Action Fund is a non-profit advocacy group that primarily supports bitcoin mining. It is based in Mississippi, and its co-founder actually worked in the Trump administration, rolling back Obama-era climate policies. It was actually founded five years ago as something called Energy 45 Fund. And its founder, Mandy Gunasekara, had spent the previous two years at the Environmental Protection Agency, where she played a key role in the decision to withdraw the United States from the Paris climate agreement and helped repeal the Clean Power Plan.
Jamali: And he worked with former EPA chief Scott Pruitt, who listeners may remember from that era of the Trump administration.
Dance: Right. In fact, he credited Scott Pruitt with introducing her to bitcoin and bitcoin mining.
Jamali: Oh wow.
Dance: Yes, that was an interesting thing he said in a podcast that originally, Mr. Pruitt had suggested they go into business together selling energy to bitcoin miners.
Jamali: I had no idea. Well, we reached out to the Satoshi Action Fund for this segment and have not received a response. Let me ask you, Gabriel, how is this law in Arkansas part of a larger trend? Where else are these crypto mining industry deregulation laws being attempted, and where have they been successful?
Dance: Yes, the Satoshi Action Group is very ambitious. So, in addition to the Arkansas bill, a very similar law took effect in Montana last year, and the Satoshi Fund said it expects to pass several more this year. The Louisiana House recently unanimously passed a similar bill. There’s a bill making its way to Missouri as well. But there are other places where bills face stronger obstacles. In Indiana and Georgia, I believe the bills are unlikely to pass, or at least deemed unlikely. And even in North Carolina there is strong resistance. And the reaction is generally like: why should we proactively protect this industry over any other industry? I think that’s a smart question to ask.
Jamali: So Gabriel, what’s the next step? Will we see more of these bills?
Dance: I think most of the bills that were supposed to be introduced were. That said, the Satoshi Action Fund continues to lobby lawmakers at the federal and state levels on the issue, using many of the same arguments that, at least in Arkansas, have not happened, such as jobs, or have caused serious consequences. problems for local communities.
While the Satoshi Action Fund did not respond to our request for comment, we reached out to the nonprofit Earthjustice, which has represented community groups across the country who have filed lawsuits against cryptocurrency mining operations. We spoke with Mandy DeRoche, deputy attorney general of the Clean Energy Program. Here is her statement:
We have seen across the United States how energy-intensive cryptocurrency mining strains power grids, restarts and decommissions dirty coal and gas plants, raises electricity rates for others, increases local air pollution, and of water and is as loud as planes about to take off. Cryptocurrency miners do not need special incentives or rights or special protections at the expense of real people in the affected communities. Cryptocurrency miners already face virtually no oversight or regulation. The Arkansas Legislature and Arkansas residents learned this the hard way. Policymakers in other states should understand the true impacts and externalities of this industry, local communities and the environment and not fall into the same trap.
Mandy DeRoche, deputy attorney general of Earthjustice’s Clean Energy Program
Although Arkansas has reinstated some of its protections for cryptocurrency mining, Oklahoma recently passed its own mining rights law will go into effect this November. The law offers cryptocurrency miners similar protections from local restrictions.
Meanwhile, the Biden administration issued an order requesting MineOne, the owners of the Wyoming cryptocurrency mining data center mentioned by Gabriel, close and sell the mine. MineOne is majority owned by Chinese citizens.