New York has approved a bill to ban Bitcoin mining operations that allegedly harm the environment with carbon emissions. A law circulating in the US Senate aims to treat crypto assets as commodities.
This week, two relevant legal movements have impacted the cryptocurrency market in the United States. Even though there has not been any noted effect on prices, experts highlight the importance of those steps to regulate the sector. New York has stressed the environmental harm of mining processes, while a law circulating in the US Senate aims to treat cryptocurrencies as commodities.
Blockchains using a proof-of-work (PoW) consensus mechanism have been controversial, as critics point to excessive power consumption and inefficient use of resources. Meanwhile, proponents argue that their heightened security and decentralization features justify the high energy use.
New York lawmakers have recently approved a bill to ban some Bitcoin mining operations that use high levels of carbon. Julius Baer experts comment this shows that the environmental footprint of digital assets remains a priority for regulators and investors.
The United States has most of the Bitcoin hash rate (mining difficulty) worldwide, indicating that most miners are in the country. Therefore, those experts think any possible regulatory measure could propagate and set a precedent for bans in other states.
The mining of cryptocurrencies could occur anywhere, and the prevailing regulatory environment and electricity costs are the primary driver of location decisions. The proposed law could lead several large-scale miners to leave the state for more crypto-friendly places, discouraging blockchain technology in New York.
Cryptocurrency miners and companies might migrate from New York, but lawmakers and regulators still focus on the relative sustainability of those assets. They believe that the negative environmental impact of cryptocurrencies is an exaggeration due to the sharp focus on Bitcoin.
They conclude that developers of decentralized apps (dApps) seek other mechanisms, like a proof-of-stake consensus, for greater scalability. They consider they are the primary beneficiaries of decentralized finance (DeFi).
Proposal for the CFTC to Regulate Cryptocurrencies
The US Senate is studying the bipartisan law introduced by Democratic Senator Kirsten Gillibrand and Republican Senator Cynthia Lummis. They belong to the Agriculture Committee and the Senate Banking Committee, respectively.
This bill, called the Responsible Financial Innovation Act, places the Commodity Futures Trading Commission (CFTC) as the primary regulator. Lark Davis, an analyst at Wealth Mastery, says this federal agency will regulate many cryptocurrencies instead of the SEC.
Despite not knowing what to do with DeFi and NFT (non-fungible tokens), Davis thinks that transactions below USD 200 will be exempt from taxes. That will encourage retailers to adopt crypto assets as there is regulation for stablecoins and protection for self-custody wallets.
Marcus Sotiriou, an analyst at GlobalBlock, says this will motivate those merchants deterred by that tax issue. In addition, the support for stablecoins will provide confidence to many investors, especially after the recent events with UST.
The expert considers that this bill would provide the regulatory clarity many institutions seek before investing. Although the Senate has not yet approved it, he believes it holds great promise for potential investors.
By Alexander Salazar
