Sanders signs bills to require crypto mining permits, restore local authority to issue regulations

Gov. Sarah Huckabee Sanders signed two bills Friday to regulate crypto mining in Arkansas while also handing back local authority to cities and counties that want to oversee the burgeoning industry.

The bills signed into law, Senate Bill 78 and Senate Bill 79, were the state Legislature’s attempt to address concerns over the noise, regulation and foreign ownership of crypto mines. The legislation amends the Arkansas Data Center Act of 2023, which prohibits localities from passing ordinances aimed at regulating crypto mines.

However, in the months since the act’s passage, many lawmakers expressed regret about the Arkansas Data Center Act after hearing from residents who expressed concerns about the noise related to cooling fans used by nearby crypto mines and from local officials who felt powerless to regulate such operations.

SB 78, sponsored by Sen. Josh Bryant, R-Rogers, returns the authority back to cities and counties to pass regulations on crypto mines. Bryant also was the sponsor, along with Rep. Rick McClure, R-Malvern, of the Arkansas Data Centers Act, also known as Act 851 of 2023.

The law also bars local governments from passing ordinances that prevent a resident from mining for cryptocurrency in their home or requiring residents to obtain approval first.

SB 78 requires crypto mines to use “noise-reduction techniques” such as liquid or submerged cooling, or for operations to fully enclose the envelope, which requires covering the noise-generating equipment on all sides.

There is an exception for crypto mines that are at least 2,000 feet away from the nearest residential or commercial building, or if the mine is in an area zoned for commercial use. Crypto mines that fall within an exemption can instead use a “passively cooled pre-manufactured container without additionally enclosing the system in a complete envelope.”

SB 79, sponsored by Sen. Missy Irvin, R-Mountain View, would require crypto mines to be permitted by the Oil and Gas Commission.

Both bills also place prohibitions regarding ownership by “prohibited foreign parties” such as China or other countries subject to International Traffic in Arms regulations. Both bills ban prohibited parties from any “ownership interest of greater than zero percent.”

Both laws were passed with an emergency clause meaning they take effect immediately, but they give existing crypto mines 90 days to comply.

Sanders indicated during a news conference Thursday that she would sign the bills, saying, “We also continued to shut down Chinese Communist party influence in our state and re-establish local control over crypto-mining facilities and crack down on bad actors.”

Some crypto mines have drawn complaints from residents about the loud buzzing sound of the fans used to cool the banks of computers that work to solve complex equations to unlock access to digital currencies. The mines are also energy-intensive, using vast amounts of electricity to power the mining rigs and fans that can run 24 hours a day.

Lawmakers also expressed concerns about foreign ownership of some mining operations, particularly from China. One crypto mine in Arkansas County owned by Jones Digital, LLC is under investigation by the Arkansas attorney general’s office regarding ties to China, which could violate state law that bars certain types of foreign ownership of agricultural land.

The House passed SB 78 in a 93-4 vote, while the Senate passed it 26-3. The House approved SB 79 in a 93-5 vote and the Senate passed it in a 32-0 vote.

Bills addressing crypto-mining regulations and a pay increase for state employees were the only legislation unrelated to the state budget taken up by the Legislature during the fiscal session. Lawmakers in both chambers must approve a resolution with a two-thirds vote for non-appropriations bills to be considered during a fiscal session, which occurs in even-numbered years.

A slate of resolutions to consider various bills to regulate crypto mining by Sen. Bryan King, R-Green Forest, failed to reach the two-thirds majority in the House. King had previously asked the governor to call a special session to regulate crypto mining and has taken a hard-line stance against the industry.

King was critical of Bryant’s and Irvin’s bills, arguing that they did not go far enough in regulating crypto mines. Among his resolutions, King proposed legislation to require crypto mines to provide notice before buying or leasing land for use, fees for excessive electricity and a ban on crypto-mining computers and software made in China.

Information for this article was contributed by Josh Snyder of the Arkansas Democrat-Gazette.