The Crypto Conundrum

The Arkansas Legislature is in town for a few weeks to vote on budget bills, but it looks like it will also try to clean up a loud, digital mess it created.

That is: the current state of crypto mining in Arkansas.

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In an overzealous attempt to head off regulation of this novel industry, the General Assembly in 2023 enacted a first-of-its-kind law that preempts local governments from imposing certain restrictions on the cryptocurrency facilities.

The problem? Some of these outfits emit loud, constant noise, disturbing wildlife and driving neighbors mad. Others worry about the industry’s high use of electricity and negative impacts on the power grid.

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I won’t pretend to be an expert on the mining of Bitcoin and other cryptocurrencies, but it’s basically the process blockchain networks use to release new coins into the market and record transactions. These operations comprise large data centers running trillions — yes, trillions — of calculations per second.

Much of the noise comes from the cooling mechanisms used to keep the computers from overheating.

Several dozen Arkansas counties raced to pass noise ordinances before the law took effect last year, but those ordinances didn’t go far enough to restrict noise and some have already been challenged in court. Now, they’re stuck.

I had a lengthy phone conversation last week with state Sen. Joshua Bryant, a Republican from Rogers who co-sponsored the 2023 law. I found him to be transparent and introspective about the issue, wrestling with how to strike the right balance between protecting the mines’ neighbors without infringing on the rights of property owners interested in using their land for digital mining.

The miners’ rights end, Bryant said, where they start to infringe on the rights of neighbors to quiet enjoyment.

Bryant has offered one of a number of proposals that aims to fix the issue. His legislation has been widely criticized as not going far enough, but he told me that he is still working out the details. Ultimately, he said he hopes to amend his proposal to codify into state law a requirement that mines be built up to industry standards that would effectively eliminate nuisance noise.

He noted that there are several crypto mines in the state that were built to these standards and you would never know were there. The noisy facilities are run by a handful of “bad actors,” he said

Bryant also said he wasn’t as concerned about mining operations stressing utilities because they have rate agreements with utility companies, which can take action if those agreements are broken.

What is the lesson here for businesses? To Bryant, it’s to be a good neighbor if you don’t want to invite government regulation.

He alluded to his time in the Marines where units would police themselves if a member got out of line. Businesses would be wise to do the same.

Lest a drill sergeant — or the hand of government — steps in to do it for them.

Email Hunter Field, editor of Arkansas Business at hfield@abpg.com