Regulation
What are mining rights laws and how do they affect BTC miners?
Published on June 30, 2024 at 7:00 AM EST.
Several US states have introduced and passed mining rights laws to protect the Bitcoin mining industry, recognizing the economic benefits that cryptocurrency mining can bring to their economies.
Read on to learn more about right to mine laws, their key provisions, their impact on Bitcoin mining, and the challenges they face in the implementation process.
What are mining rights laws?
The cryptocurrency mining rights bills are a series of laws from various jurisdictions in the United States that protect the rights of cryptocurrency miners and prohibit predatory practices such as excessive electricity pricing. These bills have already passed in states such as Montana, Mississippi, Oklahoma and Arkansas.
Proposed mining rights bills have allowed miners to take away local governments’ right to enforce zoning laws aimed at restricting cryptocurrency mining operations.
Texas welcomed the large migration of hashrate from China after the People’s Republic banned crypto operations in 2021. Since then, the state has incorporated various pro-cryptocurrency laws into its constitution that apply to residents who generate, use and archive Bitcoin.
These laws have led to the establishment of numerous cryptocurrency businesses in Texas, and in 2023, state lawmakers passed two more bills supporting cryptocurrency miners.
The first bill, SB 1929, requires miners consuming more than 75 megawatts must register with the Public Utilities Commission (PUC) in Texas, which will then share the data with the Electricity Reliability Council of Texas (ERCOT), a grid operator charged with, among others, managing the electricity consumption loads of energy-intensive businesses.
The second bill, HB 591, introduced tax exemptions for businesses that exploit what would otherwise be wasted gas. This and other laws passed in Texas and other U.S. states aim to eliminate the limiting factors facing Bitcoin mining operations.
Which states have passed Right-to-Mine cryptocurrency laws so far?
Crypto mining rights laws are under discussion in several US states.
The states of Arkansas and Montana passed their mining rights laws in 2023 with the help of the Satoshi Action Fund, an educational organization dedicated to informing regulators and policymakers about the benefits of Bitcoin mining.
Through each of the bills, state legislators sought to create adequate laws to protect miners from predatory electricity rates, zoning laws intended to prohibit mining operations in certain areas, and excessive taxation.
For example, Montana’s Right-to-Mine laws have banned the addition of any taxes to bitcoin when used as a payment method. Mississippi also passed a similar law in February 2023, making it legal for businesses and individuals to operate bitcoin mining nodes at home and in a business.
In Oklahoma, a law was passed to protect Bitcoin rights in May 2024. However, the law will go into effect in November 2024. In addition to supporting Bitcoin mining, the law promises the right to self-custody, allowing people to hold your crypto assets securely. The law also allows Bitcoin and other cryptocurrencies to be used for transaction purposes without additional taxes.
How will mining rights laws impact Bitcoin mining?
The right-to-mine laws that have been passed all have one theme: protecting miners and outlawing punitive regulatory practices that limit Bitcoin mining.
This means Bitcoin Miners would be legally protected to mine Bitcoin for commercial and domestic purposes, helping to create widespread adoption of the digital asset.
Arguably, Right-to-Mine laws can also pave the way for more universally accepted laws around cryptocurrency mining and usage. This could have a very positive impact on the cryptocurrency industry as a whole, paving the way for new capital to flow into the industry.
The challenges facing Bitcoin mining rights laws
Although several jurisdictions have begun to pass Right-to-Mine Bitcoin laws and more are expected to join, the bill still faces some challenges.
The two main challenges that Right-to-Mine bills face are the high energy consumption of Bitcoin mining and noise pollution.
Bitcoin Mining and the Clean Energy Transition
One of the challenges facing Bitcoin mining rights laws is an issue raised by clean energy campaigns, which argue that Bitcoin contributes to global carbon emissions.
Bitcoin uses the proof-of-work consensus mechanism, which has always been energy-intensive as it requires a lot of electricity and computing power to carry out hashing operations. Due to high electricity consumption, Bitcoin mining also contributes to global carbon emissions.
A UN study conducted between 2020 and 2021 revealed that Bitcoin mining emitted over 85.89 Mt of CO2 globally. Therefore, laws aimed at protecting cryptocurrency miners through Right-to-Mine laws have faced backlash from environmentalists.
Neighborhood Complaints About Bitcoin Mining Noise
In addition to the energy consumed, Bitcoin mining rigs can also be quite noisy.
Bitcoin mining requires specialized, high-powered computers that run all day, every day. With thousands of computers running at the same time, Bitcoin mining causes noise pollution. Sound levels from a mining rig are said to be between 70 and 9 decibels.
People who live near mining operations have also described the noise as “like a plane engine idling on a nearby runway.” Despite the level of noise pollution caused by Bitcoin mining, Right-to-Mine laws will make it illegal for neighborhoods to enjoy zoning ordinances, as this would go against the bill.
What is Satoshi Action Fund’s Model Mining Right Law?
The Satoshi Action Fund has published the Right-to-Mine model law that protects Bitcoin mining.
The bill protects commercial crypto mining activities from local regulation and oversight. The model bill (now called The Blockchain Foundations Act) has two main supporters:
- Prohibit localities from enacting zoning and noise ordinances that protect neighbors from the noisy operation of cryptocurrency mining facilities.
- Provisions prohibiting utility regulators from overseeing cryptocurrency activities and setting relevant electricity rates that take into account costs, effects on other customers, and risks to the grid.
Some US states have already passed mine rights laws, while many others have proposed the same law to their local state. The Satoshi Action Fund believes that Right-to-Mine laws will “ensure that Bitcoin and digital asset technologies are able to grow and that innovation can thrive.”
The conclusion
Right-to-Mine laws will have a lasting impact on the Bitcoin mining industry and the cryptocurrency industry as a whole. The passage of these laws by several states could pave the way for a national law. Furthermore, it could lead to stronger laws covering the issuance and use of cryptocurrencies.
Because laws like these will legally protect Bitcoin miners, they will also help attract more crypto businesses, spur innovation, and create economic opportunities.
While some states have already passed mining rights laws, other states have introduced the bill in their Senate and are awaiting a vote.