The Future of Crypto-Asset Mining: The Inflation Reduction Act and the Need for Uniform Federal Regulation

Authors

Liz Guinan

Abstract

Crypto-asset mining is energy-intensive and environmentally harmful, presenting challenges and opportunities for federal, state and local governments, regulators, and society as a whole. As of December 2021, the United States has thirty-eight percent of the global crypto network hash rate, which is the total amount of computational power used to mine and process crypto transactions, making the United States the world’s largest crypto-asset mining industry. The total electricity consumption of crypto-asset mining in the United States is estimated to be around 121.36 terawatt-hours (“TWh”) per year, which is equivalent to the electricity consumption of approximately 10.9 million households in the United States. Crypto-asset mining in the United States is extremely energy-intensive, emitting roughly 65.4 million metric tons of carbon-dioxide annually, or the equivalent of seven million gasoline-powered vehicles. As a result, effective regulatory frameworks are necessary to address the explosion of energy and environmental issues caused by crypto-asset miners, who are under pressure to maximize earnings by using less expensive carbon-emitting energy.

To date, crypto-asset mining has not been governed by a federal regulatory framework, but instead by a patchwork of state-by-state responses that vary from highly restrictive, such as the moratoria proposed in New York, to dangerously permissive, such as the deregulation occurring in Wyoming. This article examines existing federal, state, and local regulatory schemes that directly or indirectly address the negative effects of crypto-asset mining. Although different state and local regulations attempt to strike a balance between reducing crypto-asset mining’s negative environmental and energy consumption impact and retaining crypto’s economic benefits, the country will continue to suffer from crypto-asset mining’s severe energy and environmental consequences until there is a unified response. This article proposes that the Inflation Reduction Act’s (“IRA”) federal regulatory authority, as well as earlier federal precedent, could potentially prevent a “race to the bottom” among states with permissive crypto-asset mining regulations. In the alternative, the article also evaluates the effectiveness of state-level crypto-asset mining regulatory measures until a uniform federal response is adopted.