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Picture: 123RF
Picture: 123RF

When bitcoin miner CleanSpark bought a data centre in the Atlanta suburb of College Park, the company had a problem: it wanted to switch to a cheaper, greener power provider but Georgia law would not let it. Enter the head of the state’s power board, who last year approved a plan under which the old data centre would continue buying power from a big utility, while 15,000 mining machines on the same piece of land would be allowed to buy cleaner power sold by a nonprofit generation organisation at about half the price. 

“At the end of the day, Georgia wants this business here,” Matt Schultz, CleanSpark executive chair, said in an interview. “They’ve done everything in their power to grow bitcoin in the state.”

The US has become the world’s top destination for crypto miners after China banned the energy-intensive industry and as Russia considers doing the same. Now hundreds of thousands of mining machines worth billions of dollars are plugging into electrical grids across the US, spawning an entirely new industry — complete with new tax revenue for local governments and big profits for many miners as well as concerns about power use and environmental effects. Some states are working to attract miners while others have taken a more cautious approach, or even pulled up the welcome mat entirely.

Among states welcoming the business, Georgia has emerged as a go-to for miners, according to Foundry, a cryptocurrency company that also operates Foundry USA, the world’s biggest mining pool. Miners in the state were responsible for more than 34% of the computing power in the pool up to January 31, almost double its share since last year’s third quarter.

Georgia is attracting miners with its relatively low power prices and large amount of nuclear and solar power, which allows mining companies to brand themselves as sustainable or emissions-free. Regulators in the state have also built a reputation for being friendly to miners, guiding miners towards a solar programme that allows companies to offset their emissions with renewable energy credits, and giving them access to day-ahead power prices so that miners have enough time to throttle back their operations when rates are set to spike. All of this helps explain why a consortium of crypto companies including Bitmain Technologies said in September they were bringing another 56,000 miners to the state. 

Other states with the largest mining operations in Foundry’s pool are Kentucky with more than 12%, followed by New York, Texas, Nebraska and North Carolina. Foundry has about 17% of bitcoin’s global computing power, so its figures do not represent all US miners. For example, some big Texas miners are not in the Foundry pool so the numbers understate that state’s share. Still, the data does provide a partial view of where miners are flocking, or where they are avoiding, as the case may be. New York state’s share fell from about 20% to under 10% in the same period.

Bitcoin miners are made up of thousands of computers that run complex calculations to maintain the cryptocurrency’s network, with successful miners rewarded in the valuable and volatile virtual currency. Nobody actually goes underground and no metals are “mined” in the traditional sense. There is also a difference between the financial and professional services that support bitcoin, which politicians such as New York City mayor Eric Adams are eager to attract, and actual mining, which require big data centres and consume large amounts of electricity. 

Some states are pushing to attract miners with tax incentives. Kentucky passed a law in 2021 that waives taxes on energy purchases by mining companies, while Wyoming exempts any natural gas used to power mobile mining rigs from taxes. In 2021 alone, 33 states had bills supporting their cryptocurrency infrastructures and 17 enacted new laws, according to Heather Morton, a tax policy analyst at the National Conference of State Legislatures.

New York, meanwhile, has had a hot-and-cold relationship with its miners. While the state has cheap and green hydropower and dormant industrial sites make good mining locations, legislators are pushing a bill that would ban mining for three years, and two towns near the Canadian border temporarily outlawed any mine. The private equity-backed Greenidge Generation is waiting to see if the pollution permits that allow it to operate will be renewed, but the head of the state agency charged with the renewal gave some indication of his views with a tweet in September that read, “Greenidge has not shown compliance with NY’s climate law”. 

Foundry invested $400m in the US last year but New York’s discouraging tone towards miners meant that only 10% of that spending was there, said Kyle Schneps, the company’s director of public policy. “New York is not expanding as quickly because there’s political and regulatory ambiguity there,” he said.  “Miners are concerned about that and the possibility of a moratorium.” 

Regulations that vary by state sometimes spark miners to move their operations. Sergii Gerasymovych was excited when his crypto company sold a big mining rig to an oil and gas operator with plans to mine bitcoin in New Mexico. But when the company started to install the mobile rig, which burns natural gas that would otherwise be flared to power about 700 miners, they learnt that New Mexico strictly regulated generators such as the one in the mining rig.

So the company instead trucked the rig to Texas in 2020 and set it up there instead, said Gerasymovych, CEO of EZ Blockchain. (New Mexico has no presence in the Foundry USA mining pool, while Texas is the fourth-largest.) “On the one side of the border you can use flaring to mine bitcoin and be praised,” he said. “On the other side of the border you’re called evil because you’re sending emissions into the air.” 

Core Scientific is one of the biggest miners in the US with operations in Georgia, North Carolina, Kentucky and North Dakota, and is developing another mine in Texas. Darin Feinstein cofounded the company in 2017 and looked at hundreds of sites to find the company’s first location in Marble, North Carolina, which was located in a former factory for Levi’s jeans that took advantage of cheap hydropower. 

Feinstein said that while he once operated miners in Washington state, he has since turned down dozens of deals both there and in New York because of the unfriendly approach to mining from local politicians and utilities. “Listen, we’re not moving into vicinities that don’t want us, hard stop,” Feinstein said. “We’re not going to New York, we’re not going to areas that don’t want this industry within their borders.”

Tricia Pridemore heads the Georgia Public Service Commission, which oversees electric companies and power prices in the state, and is the regulator who stepped in to make sure CleanSpark could switch to the power provider it wanted.

“I don’t necessarily have an opinion on bitcoin mining,” she said in an interview. She sees her role as talking with miners to tell them what they should know and giving them some ways to accomplish their goals. “If they consume a lot of energy and we work with the utilities, then they’re a great fit for Georgia.”

Bloomberg News.

For more articles like this please visit Bloomberg.com


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