Casey Wagner

Coinbase&#8217;s first crypto policy town hall, held in New York City on Thursday, diverged into a debate over the state’s crypto mining policies. The tension escalated as policymakers clashed over New York’s new ban on certain mining practices.



In November 2022, Governor Kathy Hochul signed off on a two-year moratorium on fossil-fuel powered proof-of-work mining facilities in the state. The bill was <a href="https://blockworks.co/news/anti-cryptocurrency-mining-bill-still-alive-in-ny-legislation">controversial from the time it was introduced</a>, with advocates citing environmental concerns associated with mining and adversaries pointing to stifled innovation and job losses.



The discourse around cryptocurrency in the New York state legislature was quite positive until environmentalists got involved, Diane Savino, former New York state senator and current senior adviser to New York City Mayor Eric Adams, said during the <a href="https://policytownhallnyc.splashthat.com/">town hall</a>.&nbsp;



“In one year&#8217;s time, all of [our productive conversations] went down the toilet because people were terrified of being considered anti-environment,” Savino said. “Environmental advocates are incredibly organized…With that, I lost half the support I had on the bills on blockchain and they never moved in the assembly as a result of that.”&nbsp;



Micah Lasher, who serves as director of policy for Hochul, disagreed, arguing that the industry was being more deceitful than environmental activists.&nbsp;



“I don&#8217;t think the environmentalists were intellectually dishonest,” Lasher said. “I think there was a fair amount of intellectual dishonesty by the industry that made a strategic mistake in suggesting that that bill was equal to an attack on crypto as a general matter.”&nbsp;



The <a href="https://blockworks.co/news/new-york-passes-bill-restricting-carbon-fueled-crypto-mining-operations">moratorium targets only certain miners using certain forms of energy</a>, Lasher said, so to say the law limits the entire industry is unfounded.&nbsp;



“That subset of the subset had enormously deleterious environmental impacts, that was true,” he said. “I don&#8217;t think the industry does itself any favors when it takes that issue and frames it as an existential one for financial innovation in the state of New York.”



Still, Savino said, the moratorium bill was a prime example of lawmakers stepping back from crypto over fear of going against environmentalists.&nbsp;



“[Environment Advocates Action] does an annual list of ‘friends’ of the environment and ‘enemies,’ and the worst enemies get the oil slick award,” Savino said. “No elected official wants to see that go out because it’s mailed to their constituents, so that&#8217;s one of the reasons why the crypto mining moratorium went as far as it did in such a short period of time.”&nbsp;



The law threatens economic expansion in the state, particularly in communities with limited growth opportunities, according to Clyde Vanel, assemblymember for New York’s 33rd district.&nbsp;



“​​In factories that were closed for generations, people were working, getting three times the average wage in the area,” Vanel said of the crypto mining operations, which he visited in 2020. “That was happening in different pockets around the state, where it&#8217;s a challenge for economic activity.”&nbsp;



All industries, including crypto, need to think about how to reduce their carbon footprint, Vanel added, but shutting down operations for two years was not the answer. The moratorium will expire in 2024, although there may be efforts in the Assembly or Senate to extend or expand the ban. 



The town hall, hosted in New York City Thursday, is part of a new series dubbed “<a href="https://nft.coinbase.com/drops/mint/static/ethereum/stand-with-crypto">stand with crypto.</a>” Coinbase said it will host similar events around the country in an effort to advance conversations between industry members and legislators.



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Coinbase

New York legislators face off over mining moratorium during Coinbase town hall

<div id="highlights-block_6227b12f93309" class="highlights">
 <ul>
 <li>Efforts are underway in the House and the Senate to regulate stablecoin issuers and oversee reserves</li>
 <li>The escalating conflict in Ukraine has led lawmakers to question how a CBDC might work in the US</li>
 </ul>
 
</div>



As stablecoins and their reserves have been increasingly scrutinized, bills designed to regulate the digital assets will likely be introduced by US lawmakers this month, according to a source familiar with the matter.



Different versions of the bill are expected to be rolled out in the House and Senate this month, the person said. The source was granted anonymity to discuss private information.



Both the House and Senate heard from Jean Nellie Liang, the under secretary for domestic finance at the Department of the Treasury, in February to discuss a recent report on stablecoins from the President’s Working Group on Financial Markets (PWG).



The PWG and Liang recommended that stablecoin issuers must be federally insured depository institutions — more commonly known as banks. More Democrats are starting to disagree with the guidance, the person said, but the upcoming bills, some of which will be bipartisan efforts, will center around creating rules for stablecoin reserves.



&#8220;There seems to be a bipartisan consensus that Congressmen want to prevent another situation like Tether, the stablecoin known as USDT that has been subject to enforcement actions and scrutiny from regulators for holding only a small portion of its reserves in US dollars,” said Ron Hammond, director of government affairs for the Blockchain Association. “The bills may include measures requiring stablecoin issuer audits and clearer guidelines about what assets can make up reserves and whether banks or nonbanks can issue stablecoins.&#8221;



The move comes after <a href="https://cms.blockworks.co/democratic-rep-stablecoin-issuers-dont-have-to-be-banks-with-100-reserves/" target="_blank" rel="noreferrer noopener">Rep. Josh Gottheimer</a>, D-N.J.,revealed in February an <a href="https://gottheimer.house.gov/uploadedfiles/dd._stablecoin_innovation_and_protection_act_of_2022.pdf" target="_blank" rel="noreferrer noopener">early draft</a> of legislation aiming to classify certain stablecoins as “qualified” if consumers can redeem the digital currency on a one-for-one basis with US dollars.



Recent concerns over Russia’s <a href="https://cms.blockworks.co/russia-accelerating-cbdc-efforts-as-us-eu-ponder-swift-ban-of-russian-banks/" target="_blank" rel="noreferrer noopener">central bank digital currency</a> (CBDC), which is currently in pilot, and Canada&#8217;s freezing of crypto addresses have lawmakers rethinking the risks associated with a US CBDC, the person added. It’s not the first time lawmakers have questioned the role a CBDC might play in the current financial landscape.



In January, during Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee, Sen. Pat Toomey, R-Pa., questioned whether a Fed digital dollar would be able to exist alongside a “well-regulated, privately issued stablecoin.” Powell, who <a href="https://cms.blockworks.co/powell-a-cbdc-would-make-cryptocurrencies-obsolete/" target="_blank" rel="noreferrer noopener">previously argued</a> that a CBDC would render private stablecoins obsolete, assured Toomey the two are not mutually exclusive.



While efforts to draft bills related to stablecoins have been in the works for some time, the escalating situation in Ukraine may delay future progress. One lawmaker’s office has already put their stablecoin work on hold, the person said.



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