Cryptocurrency Mining Tariff Approved in New York (1)

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Gerald B. Silverman Albany, N.Y. Staff Correspondent Ryan C. Tuck Washington Deputy News Director

By Gerald B. Silverman

Cryptocurrency miners will face a new tariff on the electricity they buy from certain New York municipal power companies beginning March 23 under a ruling by the state Public Service Commission.

The commission granted permission for 36 upstate municipal power companies to impose the extra charge on companies that have a maximum electric demand exceeding 300 kilowatt hours.

The move comes just days after the City of Plattsburgh, N.Y., home of two Bitcoin mining companies, approved an 18-month moratorium on cryptocurrency mining to preserve its electricity.

The move to impose higher electric costs and limits on cryptocurrency could be part of a trend among local governments that see little economic benefit from the companies, said Shone Anstey, president and co-founder of Blockchain Intelligence Group, a cryptocurrency analytics company.

He told Bloomberg Tax that mining companies provide relatively less tax revenue and employ relatively fewer employees when compared with other companies consuming so much energy.

“Each municipality needs to make up their minds if they want it or not,” he said. “It’s okay if they don’t. Some municipalities have tons of power.”

Anstey said mining companies are likely to move to areas where there is cheaper electricity, like Alberta, Canada. He said the electric power is like a security mechanism for the cryptocurrency network.

“If you’re going to attack the Bitcoin network, you have to have more power than a small country,” he said.

One Third of Power

Mining is a process by which individuals or groups get paid in cryptocurrency to run complex mathematical equations on high-powered computers in order to confirm the validity of transactions.

Municipal power companies who are members of the New York Municipal Power Authority petitioned the state to allow the tariffs because they said miners were using too much of the low-cost electricity that they provide to customers.

In some cases, a single mining company can account for one-third of the entire load for a municipal electric company, according to the commission.

“We must ensure business customers pay an appropriate price for the electricity they use,” John B. Rhodes, chairman of the commission, said in a March 15 statement.“This is especially true in small communities with finite amounts of low-cost power available,” he said. “If we hadn’t acted, existing residential and commercial customers in upstate communities served by a municipal power authority would see sharp increases in their utility bills.”

‘Happy to Pay Fair Share’

David Bowman, founder and CEO of Plattsburgh BTC LLC, said he supports the commission ruling.

“People chose Plattsburgh to mine because of the cheap electric, but also the cold climate and college too,” he told Bloomberg Tax. “Nobody came in trying to increase rates for citizens living in the towns they mine in.”

He said “miners are happy to pay their fair share to make sure ratepayers aren’t subsidizing their operations.”

To contact the reporter on this story: Gerald B. Silverman in Albany, N.Y., at gsilverman@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

Text of the commission's ruling is at http://src.bna.com/xg4.

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