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On the morning of June 3, the New York State Senate passed its highly controversial Assembly Bill A7389C. It “establishes a moratorium on cryptocurrency mining operations that use Proof of Authenticity (POW) methods to validate blockchain transactions [and] provides that such operations shall be subject to a full general review of the environmental impact statement.”
The bill will act as an amendment to the existing state Environmental Protection Act. The text highlights the environmental concerns of Bitcoin mining as the impetus behind the ban, stating:
“(c) To mitigate the current and future effects of climate change, New York State has implemented the Climate Leadership and Community Protection Act, which requires that statewide greenhouse gas emissions be reduced by 85% by 2050 and that the State have a net zero emissions. in all sectors of the economy until then;
(d) Cryptocurrency mining operations that use authentication methods to validate blockchain transactions are an expanding industry in New York State; and
(e) The continued and expanded operation of cryptocurrency mining operations that use authentication methods to validate blockchain transactions will greatly increase the amount of energy consumption in New York State and affect compliance with the Climate Leadership and Community Protection Act.”
The draft law has a particularly narrow focus, includes a two-year ban period, and focuses only on POW blockchain validation, rather than other methods such as proof-of-stake (POS), which typically consumes less energy and is a less secure method of blockchain validation than POW.
Two years after the law’s passage, no new application or renewed application that “uses carbon-based fuel and that provides, in whole or in part, behind-the-meter electricity that is consumed or used in cryptocurrency mining operations that use proof-of-work authentication methods for validation of blockchain transactions” will be approved.
An unfortunate potential consequence of this bill’s passage is that Bitcoin miners in New York State could go out of business. These miners are most likely to relocate their business to other states with a more favorable regulatory environment and lower barriers to entry.
While it is absolutely important to ultimately move away from harmful carbon emissions, focusing solely on those generated by the crypto mining industry seems to indicate that this bill is more about limiting crypto assets in the country than actually protecting the environment.
Unsurprisingly, this law is causing significant controversy and backlash from the crypto-asset community – especially those who reside in the state. And as many leaders and entrepreneurs in the crypto industry continue to relocate to cities like Miami or even move their operations out of the country due to regulatory uncertainty, establishing strong policy frameworks that do not hinder innovation is paramount to protecting the future of cryptocurrencies in New York and the US.
New York AG warns against crypto investments
As the crypto asset market hits some of its lowest prices in recent history, New York’s attorney general has issued a warning to citizens there against the risks of investing in cryptocurrencies. Attorney General James stated: “Even well-known virtual currencies from reputable trading platforms can still crash and investors can lose billions in the blink of an eye. Too often investing in cryptocurrencies creates more pain than gain for investors. I urge New Yorkers to exercise caution before putting their hard-earned money into risky cryptocurrency investments that may bring more anxiety than wealth.”
His remarks also called for the following characteristics of the market that consumers must keep in mind. These were the highly speculative and unpredictable value of cryptoassets, difficulty monetizing investments, higher transaction costs, unstable “stable” coins, hidden costs, conflicts of interest, and limited oversight.
FTC releases report on crypto scams
Last week, the Federal Trade Commission (FTC) released new research highlighting recent findings showing that “consumers reported losing over $1 billion to fraud involving cryptocurrencies from January 2021 to March 2022.”
Research by the FTC found that nearly one-quarter of all money lost to scams was paid in crypto-assets. These shocking new statistics seem to indicate that many nefarious actors are using cryptocurrencies to facilitate their crimes – despite the highly traceable nature of these digital assets using blockchain forensics and analytical tools.
Most reported scams used false claims of huge investment returns to manipulate or mislead consumers. Unsurprisingly, most of those involving cryptoassets also originate from the internet – especially on social media platforms.
The FTC found that younger individuals between the ages of 20 and 49 were far more likely to be victims of crypto scams, while older individuals reported losing much larger sums of money through them.
The FTC added the following red flags that consumers should watch out for to avoid falling victim to a crypto scam:
- “anyone who claims they can guarantee profits or high returns by investing in cryptocurrencies;
- people asking you to buy or pay in cryptocurrencies; and
- a love interest who wants to show you how to invest in crypto or send them crypto.”
The third and final point highlights a red flag that indicates a potential romance scam, which the FTC defines as “a love interest trying to get someone to invest in what turns out to be a cryptocurrency scam.” Crypto romance scams are another worrying trend that consumers need to be aware of – especially when dating online.
South Korea forms new regulatory body for cryptoassets
Following the collapse of the UST/Luna algorithms, lawmakers in South Korea will form a new regulatory body by the end of the month with direct oversight of the country’s growing crypto-asset market.
The new regulatory body – to be called the “Digital Assets Committee” – will place particular emphasis on strengthening consumer and investor protection rules, a topic that is becoming increasingly central to the crypto oversight plans of other international regulators. South Korean regulators are also planning their own investigation into the UST crash.
Once established, the South Korean Digital Assets Committee will be one of the world’s first regulatory bodies focused solely on overseeing the crypto-asset industry. By comparison, in the United States, the crypto industry is either directly regulated or influenced by almost every financial agency, including the Treasury, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Internal Revenue Service (IRS). – in addition to state and federal regulatory regimes.
Many cryptocurrency advocates lament the fragmented nature of crypto regulation in the US due to the complex nature of adhering to the rules and regulations of so many separate authorities. This issue is a particularly high barrier to entry for smaller companies as they often have far smaller budgets for their compliance and legal teams. If successful, South Korea could set an international example of how to establish a single agency to oversee cryptocurrencies.
Regulation on compliance with the law
