Weekly Report: New York passes bill limiting Bitcoin mining, El Salvador delays Bitcoin bonds again, Japan limits stablecoin issuance, and more

Weekly Report: New York passes bill limiting Bitcoin mining, El Salvador delays Bitcoin bonds again, Japan limits stablecoin issuance, and more

By Sam Grant - min read

Here are this week’s most intriguing stories in the cryptocurrency sector:

Not yet Bitcoin bonds, El Salvador’s Finance minister says

When El Salvador adopted Bitcoin for use as an official tender in September last year, it also set out on several Bitcoin ambitions. Among them; are building a Bitcoin city and establishing Bitcoin bonds worth $1 billion. 

The bonds, having been postponed earlier in the year, seem set for another delay as Finance Minister Alejandro Zelaya confirmed that the nation would not venture into offering them in the current bear market. Speaking during a recent interview with a local news outlet, the finance minister was queried on the state of the $1 billion bonds that were not issued in mid-March as initially planned. 

No official date when the Bitcoin bonds will be ready

Zelaya decried the poor market conditions at the time as cryptocurrencies fell deeper, fueled by the war in Ukraine. This time, he argued that the same bearish conditions still prevail hence why “it’s not time” for the bonds. Unlike previous postponements, Zelaya did not define a definite date in the future when they would come.

Even with that, El Salvador will likely debut the Vulcano bonds before the close of the year as the nation is already treading close to defaulting on an $800 million bond debt due January next year. The crypto bonds may well come in handy in saving the country from falling deeper into debt.

The Central American country is only being ‘shrewd’ in choosing to withhold the bond offering as for now, given that Bitcoin is trading less than half off its all-time high. In addition to the currently persistent bear market, bonds offered at current prices would cost El Salvador significantly more at maturation than ones offered at $60,000 or potentially higher levels.

El Salvador’s Bitcoin ambition

President Nayib Bukele has pushed the narrative of Bitcoin city, a paradise for crypto enthusiasts, whose coming alive depends on the bonds. The plan was that half of the $1 billion would be put into the city, powered by geothermal energy for miners.

However, Bitcoin’s recent price performances have been looking down and seek to put El Salvador’s plans into disarray. The country has maintained the ‘buy the dip’ course, having added 500 BTC on May 9 despite having accrued more than $37 million in losses on its crypto holdings.

Japan passes bill limiting entities that can issue stablecoin issuance 

The government of Japan on Friday passed a bill that seeks to manage the risk associated with stablecoins. The bill stipulates that only licensed banks and registered trust companies can deal with stablecoins. 

The legislation is in response to the recent crash of Terra’s algorithmic stablecoin TerraUSD, which lost its peg to the US dollar towards the end of May. The event fueled a broad sell-off in the market, pushing the prices of many crypto assets to multi-month lows. It also affected other stablecoin projects, including Deus Finance’s DEI.

Financial institutions looking to offer these virtual assets will be required to obtain registration. The specific date when the bill will take effect wasn’t disclosed, but it is expected to be next year. The Financial Service Agency is, in the meantime, working on regulations that will manage stablecoin issuers. These regulations will be implemented in coming months

New York passes bill outlawing carbon-powered mining operations

New York lawmakers on Friday morning passed a bill that proposes limiting carbon-fuelled proof-of-work crypto mining for two years. The bill, sponsored by rep. Anna Kelles, will now head to the office of Governor Kathy Hochul, having gotten getting Senate approval.

Hochul could sign the law or veto it, the former which will see New York become the first state in the US to restrict crypto mining. In a phone interview with CNBC, Kelles explained that her bill isn’t explicitly banning crypto mining but rather a two-year pause meant to lower the state’s carbon footprint.

Not all crypto mining entities will be affected by the legislation. Only those that meet the requirements guided by criteria such as the authentication method used, electric power source, and expansion plans will be impacted. Small-scale crypto miners and some existing miners won’t be affected either. No new mining operations will be allowed during this period. 

A day before the bill was passed, New York Attorney General Letitia James shared a press release warning investors about the risk involved when investing in crypto. James highlighted various risks associated with this asset class, including “extreme and unpredictably high price swings” and “potential losses due to hacking, fraud, or theft.”

She cautioned potential investors seeking to invest their hard-earned money into crypto to be careful. Specifically, she noted many “lost hundreds of billions in cryptocurrency investments as the market reached record lows” last month.

Kenyan power company KenGen woos Bitcoin miners with geo power

Kenya Electricity Generating Company (KenGen) is set to become the first entity to woo Bitcoin miners into the country. The energy-generating company is offering excess geothermal power, according to a report by local news outlet The Standard.

KenGen’s geothermal development director Peketsa Mwangi says the capacity and space to host miners is in place, confirming that the company already sees interest. Mwangi said some requested to start their activity with 20MW, then upscale with time.

Kenya is among the highest producer of geothermal power in Africa, with an installed capacity of 863 MW. Further, there’s even potential for growth, as the Rift Valley’s part running through Kenya is known to have unreached 10,000 MW of geo power below it.

Being Kenya’s leading producer, KenGen says that 86% of its power is generated from renewable sources, mostly from geothermal sources on the floor of the Rift Valley. The local news outlet reporting also confirmed that the firm has space at a new industrial park located at Olkaria, which is on offer to the miners.

By introducing an option for Bitcoin miners, the Kenyan power producer could help push sustainability as far as the environment is concerned. Also, it may enhance the development of the grid towards upsetting the high cost of power in Kenya.

Kenya is yet to define specific laws to guide the highly dominant P2P crypto transactions in the country. However, the country’s CBDC discussion paper insisted on seeing utility before adopting new technology. The central bank also noted that the M-Pesa mobile banking service that has internetworked the country could be put at risk if a CBDC is minted without proper exploration.