Sen. Bryan King hopes to bring up tougher crypto mine regulations in coming special session

Sen. Bryan King (R-Green Forrest) said today that he will once again propose tougher crypto mine regulations when the Legislature meets soon in a special session.

King said that he has alerted Senate President Pro Tem Bart Hester and House Speaker Matthew Shepherd of his plans. He pointed to recent news that the federal government has intervened to shut down a crypto mine company in Wyoming that has connections to China as one reason that the issue deserves another hearing as soon as possible.

King’s proposals for strict regulation of the crypto mine fell short in the legislative fiscal session that wrapped up earlier this month. The Legislature instead passed a different pair of bills aimed at addressing the various nuisances and concerns regarding crypto mines, which have now been signed into law by the governor. However, King argued that the bills had major holes and were largely phony efforts to quiet the controversy around crypto mines while remaining overly friendly to the industry.

King has an opportunity to try again because of the fact that a special session is likely to be called next month. Due to some combination of legislative incompetence and shenanigans, a kerfuffle over a proposed raise to the Game and Fish Commission director’s salary led to a failure to pass a budget for the commission. That puts the entire agency in limbo for the new fiscal year, beginning July 1, so the Legislature will almost certainly reconvene for a special session called by the governor to get that budget passed. The special session will likely come at a cost of around $100,000 to taxpayers.

Republican legislative leaders have already suggested that they would like to use the occasion to pass yet more tax cuts heavily titled toward the wealthy. Gov. Sarah Huckabee Sanders will almost certainly be amenable to that idea, but she just as surely won’t like the idea of taking up King’s proposals.

If the crypto mine issue is not on the governor’s call for a special session, it would require two-thirds approval in both chambers of the Legislature to even take up King’s proposals for consideration. This was the same hurdle King faced during the fiscal session. During a fiscal session, non-budget proposals likewise require two-thirds approval in the House and the Senate. King’s slate of six proposals got the needed approval in the Senate, but fell short in the House. Most Democrats in the House declined to vote for consideration of King’s proposals, for what seem like flimsy reasons. They proved to be the deciding block stopping several of the resolutions from getting a hearing.

Crypto “mining” is the process by which bitcoin confirms transactions and creates new bitcoin, using a network of high-powered computers. Unfortunately, this big-money industry is noisy and terrible for the environment. Crypto mines have often proven to be a major problem for the rural communities where they’ve popped up.

Critics have also raised concerns about whether the mines could pose a national security threat because of crypto mine companies with connections to China.

Act 851 of 2023, reportedly written in large part by the Satoshi Group — a dark money crypto advocacy group — sharply curtailed the ability of Arkansas cities and counties to regulate the industry, giving crypto companies a legal leg up on communities impacted by the nuisances they cause. This led to an outrage, stirring up local and national media reports and bringing a deluge of constituent complaints to legislators in impacted areas — typically rural.

The co-sponsors of Act 851, Sen. Joshua Bryant (R-Rogers) and Rep. Rick McClure (R-Malvern), were also co-sponsors of the new bills that wound up becoming law, which only heightened the fears of critics like King that their main fears were going unaddressed and the new laws amounted to lipstick on a pig.

“I don’t let the same man take me snipe hunting twice,” Rep. Josh Miller (R-Heber Springs) commented during a committee hearing, when asked why he didn’t trust Bryant and McClure to solve the problem they had caused.

The new laws do mostly restore local control on regulation and establish a new state regulatory and permitting system for crypto mines. They are almost certainly an improvement on Act 851, and better than nothing. (And for those focused on the national security angle, they do place limits on foreign ownership for designated nations such as China.)

But they still have some holes and open questions, and don’t go nearly as far as King’s proposals would have. The fact that the crypto mine industry is publicly applauding the measures is another red flag for critics.

Meantime, the New York Times reports that the federal government appears to have real concerns about crypto mines with connections to China:

President Biden on Monday ordered a company with Chinese origins to shut down and sell the Wyoming cryptocurrency mine it built a mile from an Air Force base that controls nuclear-armed intercontinental ballistic missiles.

 

The cryptomining facility, which operates high-powered computers in a data center near the F.E. Warren base in Cheyenne, “presents a national security risk to the United States,” the president said in an executive order, because its equipment could be used for surveillance and espionage.

“A vast majority of the machinery powering cryptomining operations across the United States is manufactured by Chinese companies,” the Times reports, a point likely to be raised by King, who had targeted such equipment in his proposals.

King’s resolutions would also have imposed fees on crypto mines for over-usage of electricity, with a fee schedule based on megawatts above certain thresholds. The crypto lobby claims that would put crypto mines out of business, which seems telling in itself.

King’s proposals included various other tougher regulations, such as repealing Act 851 altogether, restoring local control for counties and cities to regulate crypto mines without limitation (including noise ordinances), banning ownership by certain foreign nationals (again, China clearly the main target), fleshing out regulatory requirements for new or existing crypto mines operating in the state, requiring businesses to file notice six months before before purchasing or leasing land for a crypto mine, monitoring water usage and authorizing the state to take action against a mine if critical groundwater supplies were threatened, and more.

Expect a similar collection of proposals from King when the special session convenes.

“I will be working to pass real legislation to protect Arkansans,” King stated in a tweet. “This past session the pro crypto industry sponsors failed to answer straight simple questions. Also other legislators failed to be factual.”

Here’s more from the Times report, which was published Monday:

Chinese-owned cryptocurrency mines have boomed in the United States since the facilities were effectively banned in China in 2021. While some cryptomining has since restarted in China, Chinese crypto entrepreneurs are drawn to the United States for its relatively cheap electricity and well-developed legal system.

 

The Times found Chinese-owned or -operated Bitcoin mines in at least 12 states, including Arkansas, Ohio, Oklahoma, Tennessee, Texas and Wyoming, that together use as much power as 1.5 million homes. Some are owned by people or companies with links to the Chinese government or the Communist Party. Until recently, the main supplier of equipment for the mines operated from an office in a Communist Party facility on Hainan Island, The Times found.