The Bitcoin mining boom in New York state hit a roadblock as the State Senate passed a bill that will halt new permits for certain fossil fuel power plants to be used in Bitcoin mining. The measure, which also initiates a study on the environmental impact mining facilities are having in the state, passed in the State Assembly earlier this year.

Promising new jobs, the crypto industry had split Senate Democrats on whether the moratorium would come with greater environmental or economic costs. Talks languished until late in the evening as the State Senate neared its legislative deadline.

The bill will face another test as it heads to Governor Kathy Hochul to sign or veto. Hochul received a $40,000 donation last month from a chief executive of a company that runs a former aluminum plant turned crypto-mining facility, The New York Times recently reported.

After China instituted new restrictions on bitcoin mining last year, many mining operations have set up shop in the US. New York, with abundant hydroelectricity and retired fossil fuel plants that can be restarted back up to mine Bitcoin, quickly became a new hub for Bitcoin mining.

That fossil-fuel resurgence has sparked backlash from some residents and environmental advocates. They’re worried that revived fossil fuel plants, with Bitcoin’s help, will damage ecosystems and derail the state’s efforts to tackle climate change.

The bill that moved forward today establishes a two-year moratorium on any new permits for cryptocurrency mining operations that use a particularly energy-hungry approach to verify transactions on the blockchain. The approach, called proof-of-work, underpins the two biggest cryptocurrencies — Bitcoin and Ethereum.

With proof-of-work, “miners” use special hardware to solve complex puzzles, and in return, they earn crypto tokens. The process uses up a lot of energy. If the Bitcoin network was its own nation, it would rank 32nd in the world (right between Argentina and the Netherlands) in annual electricity use.

That energy demand is a threat to the climate goals set by New York State in 2019, which committed the state to an 85 percent reduction in greenhouse gas emissions by 2050.

Greenidge Generating Station in New York’s Finger Lakes region has become a particular flashpoint for residents worried about cryptocurrency mining’s impact on the environment. Begun as a coal-fired power plant, Greenidge was revamped to run on gas and converted to nearly full-time Bitcoin mining operation in 2020.

The moratorium on Bitcoin mining doesn’t apply to Greenidge, since it focuses on fossil fuel power plants submitting new applications for permits to use energy to mine proof-of-work based cryptocurrencies instead of sending that energy to the grid. Nor does the bill stop any operations that run on renewable energy or that use a less energy-intensive alternative to proof-of-work that many other cryptocurrencies use to verify transactions.