Proposed Legislation Aims to Regulate Digital Assets’ Energy Use | Husch Blackwell LLP

On June 6, 2022, United States Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) launched the first major bipartisan bill intended to regulate digital assets. Interestingly, the invoice calls for extra info across the power use of digital property. If handed, the invoice would require the preparation and submission by the Federal Energy Regulatory Commission (FERC), in session with the Commodities Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC), of an annual report to be submitted to the Committee on Energy and Natural Resources, the Committee on Environment and Public Works of the Senate and the Committee on Energy and Commerce, and the Committee on Natural Resources of the House of Representatives on the next 5 points of digital asset power use:

1. Energy consumption for mining and staking of digital asset transactions;
2. The impact of power consumption on nationwide, regional, and native power course of;
3. The results of mining and staking of digital asset transactions on baseload energy ranges;
4. The use of renewable power sources, together with using nonrenewable sources that might in any other case be wasted, and a comparability of digital asset market power consumption with the monetary companies trade and financial system as a complete; and
5. The sources and reliability of the info utilized in compiling the report.

Additional knowledge on power use of digital property could be helpful to separate the competing narratives surrounding its power use. On the one hand, some say that bitcoin mining, for instance, makes use of extreme power and contributes to international warming. On the opposite hand, others have expressed that info is rising indicating that bitcoin mining helps foster elevated renewable power use, makes use of waste power streams, and provides resiliency to {the electrical} grid. An extended-term sequence of research and evaluation of the sources touting these narratives would doubtless be helpful to develop a extra correct understanding of digital asset power use. Nevertheless, it’s value contemplating what FERC’s focus is perhaps by assessing its previous priorities.

FERC Chairman Richard Glick was lately reappointed by President Joseph Biden to one other five-year time period. While at FERC, Chairman Glick has supported rapid build-out of the electric grid and compensating flexible generation resources in addition to the climate impacts of new energy infrastructure. Accordingly, FERC will doubtless carefully monitor how the Electric Reliability Council of Texas (ERCOT)—the grid operator in Texas that isn’t FERC regulated—handles its ongoing initiative to combine massive versatile load sources into the ERCOT grid to decide whether or not FERC sees a task for crypto mining inside the FERC-regulated bulk energy system.

However, former CFTC Chairman and present Commissioner Christopher Giancarlo is a recognized supporter of blockchain innovation, whereas CFTC Chairman Rostin Benham has expressed a choice for proof-of-stake mining and has steered {that a} requirement to disclose the quantity of power utilized by a selected coin would incentivize an trade shift to this much less energy-intensive methodology of mining. At this time there isn’t any indication that Chairman Benham plans for the CFTC to formally discover these choices. The SEC might quickly be inclined to use its authority to regulate digital property by means of measures like requiring the disclosure of blockchains’ environmental impact or mandating using belief corporations, which might restrict extra environmentally taxing types of hashing.

What this implies to you

Clearly, extra info on power use is helpful to the trade. And whereas the Lummis-Gillibrand laws establishes a framework for creating solutions to the various questions surrounding power use of digital property, the views of the officers at every company charged with placing collectively the report are doubtless to affect the outcomes and warrant shut consideration by trade stakeholders.

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