As federal governments around the world are proposing bans on Bitcoin or other cryptocurrencies, it is now the City of Plattsburgh, within the state of New York, that has now imposed a ban on Bitcoin mining for a period of 18 months.
But this decision by the Plattsburgh City Council does not have anything to do with the value of the cryptocurrency or the risks associated with it. The ban has been imposed due to excessive consumption of electricity by a couple of Bitcoin mining companies.
This ultimately caused the regular energy bills of the average citizen in the city to shoot up for no fault of their own.
This newly passed moratorium is the first of its kind to be imposed by a U.S. city on the Bitcoin mining industry.
Cheaper Cost of Power Being Exploited
The reason the spotlight has turned to Plattsburgh is because the city is home to a cheap source of electricity in its hydroelectric dam, and the consumers get to pay just around half of what most other cities in the U.S. charge customers.
The City of Plattsburgh charges less than 4.5 cents per kWh, whereas it may be hard to draw power at less than 10 cents per kWh elsewhere. The city administrators also went a step further and offered power to industrial facilities at just over 2 cents per kWh to promote the economy and improve the employment potential for locals.
But then, various Bitcoin mining companies set up shop in the city and, much to the dismay of Plattsburgh City Council, the power consumption far exceeded the limits the city had recorded earlier.
One of the companies engaged in Bitcoin mining, Coinmint, was found to have used up around 10 percent of the entire city’s total usage.
The city’s difficulty is that though it gets power from the local hydroelectric power station, there is a limit to which it can draw power at low rates and if the requirement crosses that limit, the excess will have to be purchased from other sources. The price of electricity through such sources would be quite expensive and that is the reason behind this ban.
New Bitcoin Mining Companies Face the Ban
It has to be clarified that the City Council of Plattsburgh’s decision to ban Bitcoin mining is meant for new entities setting up facilities in Plattsburgh.
But the Council has to also contend with the ones already operating for some time. As indicated, the ban is not a permanent one, but applicable for the coming 18 months. The administrators will use this period to come up with the solutions to either meet the excess requirement of electricity or to charge them a higher fee by making the procurements from outside sources.
Such a solution appears to be already in the works, and the cryptocurrency mining companies may be specifically targeted for these higher tariffs for electricity use. There may even be an apportioning of a certain amount of electricity to them and if they consume more, the additional quantities could be charged at a higher rate.
Bitcoin Mining Power Consumption
By the very nature of the process, Bitcoin mining draws an amount of electricity that is often disproportionate to the kind of activity carried out. And in their attempt to earn more Bitcoins, the miners end up creating a large network of equipment at their facility. The mining companies would have learnt of the economic benefits in Plattsburgh and moved their setups here.
Now that the Plattsburgh City Council has brought in the ban, the others intending to take advantage of the cheaper electricity bills in Plattsburgh will have to review their plans.
There will also be discussions and debates on the actual benefits the Bitcoin mining business can bring to the city/state and to the public at large. There are already reservations on the future of cryptocurrencies with some governments such as India not recognizing them as legal tender. The price of Bitcoin has also been fluctuating wildly, making investments in the cryptocurrency quite a bit of a risk.