WASHINGTON – The former head of the Bonneville Power Administration and Chelan County Public Utility District cautioned a House oversight panel Thursday about the effect of cryptocurrency operations that have flocked to the Northwest in recent years in search of cheap hydropower.
At a hearing on the energy usage of blockchain technologies like Bitcoin, Steve Wright, who led the Wenatchee-based PUD until last April, told members of a House Energy and Commerce subcommittee what happened when Bitcoin miners started setting up their energy-intensive operations in Central Washington around 2014.
“These were small operations in shipping containers, vacant small businesses and residences” at first, Wright said, but soon the operations grew far bigger and caused concerns in the community over safety risks, how few local jobs the industry created relative to its energy use and a lack of tax revenue despite driving up energy costs for local residents.
Mining Bitcoin and other cryptocurrencies involves rooms full of computers working together solving complicated math problems to unearth a new coin. As more of the digital currency has been mined, the computing power required to acquire another coin has increased, leading to massive electricity usage even as the individual machines used have grown more efficient.
According to a calculation by the University of Cambridge in the United Kingdom, Bitcoin uses more electricity each year than the nations of Ukraine and Norway.
Throughout the hearing, Democrats expressed concerns over the impact of cryptocurrency energy use on efforts to reduce carbon emissions, citing Bitcoin operations that have reinvigorated struggling or shuttered coal-fired power plants in Montana and Upstate New York.
While the availability of relatively cheap hydroelectric power has made the Northwest an attractive destination for cryptocurrency operations, Wright said increased demand for low-carbon energy sources can drive up prices for residents. The rapid emergence of blockchain technologies like Bitcoin in less than a decade has posed a tough challenge to regulators in Congress.
“I think there was a lot of concern, candidly, about the potential for this decentralized and unregulated currency,” Wright said. “So when folks said to us, ‘We’d like for you to be the cryptocurrency capital of the world,’ I would say there was a skeptical reaction to whether that’s what we wanted to be or not.”
Republicans on the panel, meanwhile, warned that regulating the nascent industry could slow innovation and cautioned against Congress “picking winners and losers” by requiring cryptocurrency miners to use low-carbon energy sources.
“We in Congress have a duty, especially on this committee, to have a thoughtful approach to the technology,” said Rep. Neal Dunn, R-Fla. “We need to understand it and, importantly, ensure that new laws and new regulations are done right, implemented well and don’t strangle the innovation in this promising new technology for Americans.”
Other GOP lawmakers objected to the topic of the hearing and the fact that the oversight panel had not met for nearly four months before Thursday’s partly virtual hearing, which most Democrats joined via video streams from their offices while Republicans sat in the hearing room.
Rep. Cathy McMorris Rodgers of Spokane, the top Republican on the Energy and Commerce Committee, used nearly all the time allotted for her opening remarks to hammer the Biden administration on a range of unrelated issues, from “not being tough on China” and “authoritarian actions” to combat the COVID-19 pandemic, to the withdrawal of U.S. troops from Afghanistan and illicit drugs crossing U.S. borders.
“Why are we not hearing from this administration about their failed COVID-19 response?” McMorris Rodgers said near the end of her remarks. “Why are we not demanding answers to uncover the origins of the COVID-19 pandemic? Despite these missed opportunities, I want to say thank you to the witnesses that are here. This is really transformational technology, blockchain.”
Members of the subcommittee used much of their time seeking to understand a complex issue Congress is poised to regulate this year.
Brian Brooks, CEO of Bitcoin mining and infrastructure company BitFury, told lawmakers that when he first encountered cryptocurrency about five years ago, “I think many people believed that the point of crypto was for asset speculation, maybe it was even for money laundering, but they thought it was a solution in search of a problem.”
“And I think five years later people have figured out decentralization is what crypto is all about,” Brooks said. “It’s not just about replacing forms of money in financial transactions. What it’s about is replacing the concept of networks generally.”
Brooks and other witnesses described blockchain technology – a kind of database shared between many different computers rather than hosted on a single server – as a foundation that could serve many other purposes beyond the realm of cryptocurrency.
But Rep. Kim Schrier, a Democrat who represents Wenatchee, said that innovation has largely come at the expense of ratepayers east of the Cascades.
“Low-cost clean energy drew cryptocurrency companies around the world to Chelan and Douglas counties,” she said, “and over the last 10 years cryptocurrency companies have increased their demand for energy and at times this can threaten the available energy for homes and businesses in the region.”