The New York Senate passed a bill early Friday morning that will ban certain types of cryptocurrency mining that rely on nonrenewable energy sources.

The bill targets mining facilities that process “proof-of-work” currencies such as bitcoin and Ethereum, which is a particularly energy-intensive process of validating and protecting the integrity of the underlying blockchain infrastructure. The cited reason for the bill regarded the environmental impact of these facilities.

Proof of work functions by having users, called miners, solve complex puzzles in order to authenticate groups of transactions, called blocks, and add them to the blockchain. The first miner to solve the puzzle wins, the block is added to the chain and that user receives what is called the “block reward” of cryptocurrency. This puzzle-solving uses massive amounts of energy that scales up as more miners join the network, but it also protects the network from hostile takeover.

The bill passed the senate with a 36-27 vote in favor after previously passing the New York State Assembly in April. The bill now moves on to the desk of Governor Kathy Hochul before it can be signed into law.

If the ban is instituted, proof-of-work cryptocurrency mining operations using nonrenewable sources currently in operation may continue as normal, but new permits and renewals will be under a moratorium for the two-year duration.

The bill also calls for the state to set up an environmental study that will examine the environmental impact of proof-of-work cryptocurrency mining.

“By requiring a statewide generic environmental impact statement, this crucial information about the industry’s impact upon our climate law, and associated water, air and wildlife impacts, will be understood and can guide any potential future policy related to industry regulation,” Sen. Kevin Parker of Brooklyn, the bill’s sponsor, wrote in a memo.

The environmental impact of cryptocurrency mining, especially proof of work, has been controversial. According to Investopedia, the largest country for Bitcoin mining is the United States with 47.7% of all activity worldwide, which swelled after China banned operations within its borders. New York in particular has attracted a lion’s share of miners thanks to its cheap electricity.

Bitcoin mining operations worldwide are estimated to produce about 114 million pounds of carbon dioxide per year, according to a 2022 estimate from Digiconimist, on par with the Czech Republic.

Ethereum, the second most popular proof-of-work cryptocurrency after bitcoin, has upcoming plans to switch to what is called “proof of stake” sometime later this year. This move will allow users to “stake” their currency instead, which will enable them to maintain the integrity of the blockchain by using tokens that they lock into authenticating network blocks.

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