Bitcoin Mining Fuels Air Pollution Crisis and Legal Challenges in the U.S.

A new study in the journal Nature Communications has found that mining Bitcoin results in large amounts of harmful air pollutants - small particles produced by power plants. Between August 2022 and July 2023, about 1.9 million Americans were exposed to pollution due to mining, as harmful substances spread quickly across the U.S. thanks to winds.

The list of affected regions includes New York City, the Houston-Austin metropolitan area, northeast Texas, and areas on the Illinois-Kentucky border.

How mining affects the environment

The study was led by Dr. Francesca Dominici of Harvard University's T.H. Chan School of Public Health. Researchers found that Bitcoin mining often causes an increase in electricity generation from fossil fuel-fired power plants.

Experts analyzed data from 34 of the largest mining centers in the U.S. and concluded that mining in one state has the potential to increase the load on a power plant in another state, thereby spreading pollution.

For example, electricity consumption by a mining farm in North Carolina caused an increase in coal-fired power plant capacity in Kentucky, which ultimately worsened air quality in Illinois.

Meanwhile, Illinois residents cannot directly affect either the mining farm or the power plant. Since the pollution is not occurring in the state where its effects are being felt, there is a regulatory gap.

One of the study's authors, Dr. Scott Delaney, said there are a number of ”policy mechanisms” that can mitigate ”interstate air pollution.” However, he said, this requires action at the federal level.

Specifically, the expert suggested that the U.S. Environmental Protection Agency (EPA) should adopt a rule regarding fine particle air pollution.

Such regulation would require grid-connected states to more actively control power plant emissions. Programs could also be launched to encourage cryptocurrencies and data centers to locate in new, safer locations, taking into account the impact on public health.

It is important to note that the activity of Bitcoin miners is growing. This can be seen in the BTC network hashrate indicator, that is, the total computing power of all devices in this blockchain. Last night, it exceeded the level of 1,100 hashes per second for the first time in history.

Going to jail for cryptocurrencies

More serious legal consequences for working with crypto await Waylon Wilcox, a 45-year-old American from Pennsylvania.

He previously pleaded guilty to underreporting income on his tax return, which allowed him to avoid paying millions of dollars to the US Internal Revenue Service (IRS). He received the money for transactions involving nearly a hundred NFTs from the popular CryptoPunks collection.

According to the U.S. Attorney's Office for the Middle District of Pennsylvania, Wilcox sold 97 tokens from the CryptoPunks series in 2021 and 2022 and received more than $13 million.

However, he failed to report these transactions on his tax return, avoiding about $3.3 million in taxes. The case was the first major tax evasion case in the U.S. involving the sale of unique tokens.

IRS regulations require a taxpayer to declare capital gains or losses on the sale of ”virtual currency” subject to capital loss deduction limitations.

The progress of the crypto-enthusiast's case was commented on by Yuri Kruti, the head of the IRS office in Philadelphia. Here is his comment.

Wilcox faces a maximum sentence of up to six years in prison. However, a guilty plea is likely to result in a reduction.

CryptoPunks is a series of 10,000 algorithmically generated pixel characters in NFT format. It is one of the most sought-after collections during the peak popularity of unique tokens during the previous bullrun in 2021 and 2022.

While today the minimum price for a single CryptoPunk is 42.42 ETH or just under $69 thousand dollars, at the peak in August 2021 they sold for a minimum of 125 ETH. This amount translated to almost $479,000 dollars at the time.

In dollar terms, the value of the collection is down 85.7 percent from its all-time high. Just last week, one owner sold his CryptoPunk for $6 million dollars, incurring a $10 million loss.

That is, Wilcox made his deals with NFT literally on the wave of hype around ”cryptoPunk”, which allowed him to earn large sums relatively quickly.

The bottom line

Bitcoin mining is still a major environmental controversy - especially in the U.S., where it affects air quality even in other states. A new study raises the need for federal regulation in this area. Against the backdrop of BTC's record hash rate, the problem is becoming more and more acute, but in 2025 we will presumably see clarity on the situation with coin regulation.