Dorsey, Saylor, Fidelity write to EPA to defend bitcoin mining

These machines, known as mining rigs, work around the clock to find new cryptocurrency units.

Benjamin Halle | CNBC

Some of the biggest names in bitcoin — including Jack Dorsey, Tom Lee, and Michael Saylor — have joined forces to refute claims by House Democrats who have called on the Environmental Protection Agency to investigate the environmental impact of crypto mining.

Bitcoin works on a Proof-of-Work (PoW) mining model, which means that miners around the world run high-performance computers to simultaneously create new bitcoins and validate transactions. Proof-of-work mining, which requires sophisticated equipment and lots of electricity, has become practically synonymous with Bitcoin, although Ethereum still uses this method to secure its network – at least for a few months.

Rep. Jared Huffman (D-Calif.) along with nearly two dozen members of the House of Representatives wrote to the EPA last week, urging the regulator to ensure that mining companies comply with the Clean Air Act and the Clean Water Act and conducting “serious Concerns” over reports that cryptocurrency facilities across the country are polluting communities and making an outsized contribution to greenhouse gas emissions.”

In a counter-letter sent to EPA chief Michael Regan Monday morning, a mix of Bitcoin miners and industry experts — as well as firms including Benchmark Capital, Fidelity Investments and Fortress Investment Group — argue that House Democrats got a lot wrong with the news about the Basics of proof-of-work mining.

On the one hand, the letter is directed against the legislature, which merges data centers with power generation plants.

The counter letter states that data centers containing “miners” are no different from data centers owned and operated by Amazon, Apple, Google, Meta and Microsoft. According to the letter, each is just a building that powers IT equipment to run compute loads.

“Regulating what data centers allow their computers to do would be a massive policy change in the United States,” the letter said.

“You’re confusing the public,” said Darin Feinstein, co-founder of cryptocurrency mining operator Core Scientific — and one of the letter’s lead authors. “Pollution comes from the power generation source, and all data centers buy power upstream off-site.”

Feinstein said if the EPA wants to regulate power generation, channels already exist to regulate power generation facilities at the federal, state, and local levels.

“It would be very unusual for the EPA to regulate the type of computation that takes place in a data center. It’s clearly outside of their remit,” Castle Island Venture’s Nic Carter, who helped write the rebuttal, told CNBC.

“There’s no point in asking the EPA to care what kind of calculation is done,” Carter said.

While the EPA regulates power plants, very few PoW miners actually own the electricity production, according to the refutation.

“The letter makes it sound like there’s a bunch of these vertically integrated miners like Stronghold and Greenidge… but that’s a tiny fraction of the total hashrate,” Carter continued, referring to an industry term used to describe everyone’s computing power miners in to describe the bitcoin network.

Huffman and his colleagues at the House also have problems with specialized computer hardware, which they claim creates “major e-waste challenges” as millions of devices quickly become obsolete, resulting in large amounts of e-waste.

The letter cites estimates that Bitcoin mining alone produces 30,700 tons of e-waste annually. “Industry must be held accountable for this waste and stopped from creating it,” the letter argues.

This morning’s notice to the EPA refutes the e-waste claim, saying lawmakers cite a widely criticized research study that makes bold assumptions about the depreciation schedule for mining rigs. The letter states that the assumption of a depreciation period of 1.3 years is “extremely short” and the legislature concludes that the entire fleet of rigs is regularly scrapped.

It’s unclear whether the EPA will jump into the larger proof-of-work mining debate. The agency did not immediately respond to CNBC’s request for comment.