The Arkansas Oil and Gas Commission is on the verge of finalizing new rules for cryptocurrency mining in the state, a year and a half after the passage of controversial legislation limiting local control over the industry. The draft regulations, which aim to address public concerns and local outcry, are now awaiting approval from Governor Sarah Huckabee Sanders before they proceed to a public comment phase.
The initial backlash came after the Arkansas Data Centers Act of 2023, which restricted local governments from imposing noise ordinances on cryptocurrency mines. This legislation, heavily criticized by county officials, locals, and even some lawmakers who voted for it, has since been significantly revised. The new draft rules introduce stricter guidelines on mine ownership, particularly banning foreign entities from certain countries, and set forth a comprehensive regulatory framework for the industry. These changes were the product of additional lawmaking during the 2024 fiscal session.
According to documents obtained through a Freedom of Information Act request, the draft regulations were submitted to Governor Sanders’ office on September 27 for review. However, her office has not provided details regarding when the governor might approve the rules. Spokesperson Sam Dubke reiterated Sanders’ commitment to protecting Arkansas from foreign-owned crypto mines, stating, “Governor Sanders was the first governor in the country to kick a Communist Chinese-owned company out of her state and strongly supports outlawing foreign adversaries from owning crypto mines in Arkansas while protecting rural communities and empowering them to crack down on bad actors.”
Stringent Penalties for Violations
The draft rules outline the process for obtaining permits to operate cryptocurrency mines and specify penalties for those that violate regulations. Administrative violations could lead to fines of $2,500 per day, while operational breaches could result in fines of $5,000 per day. In certain cases, such as operating without a permit or improperly disposing of cooling fluids, mines could be ordered to cease operations entirely.
Despite the tough stance, Carol Booth, a spokesperson for the Department of Energy and Environment, confirmed that the department does not plan to hire additional staff to enforce the new regulations.
Mixed Reactions From Industry and Lawmakers
State Senator Joshua Bryant, a leading advocate of both the 2023 and 2024 laws, expressed satisfaction with the draft rules, stating that they even go beyond what was initially outlined in the 2024 legislation. He highlighted the requirement for permit applicants to provide documentation ensuring their energy use won’t harm the electrical grid or raise utility costs. “I think the industry should be fine with [the documentation requirements],” Bryant said.
Arkansas-based crypto miners, represented by the Arkansas Blockchain Council, have voiced strong support for the new regulations. Ben Smith, the council’s new president, emphasized the council’s alignment with the state’s efforts to regulate the industry. “We followed the rules and didn’t cause trouble,” Smith said, distancing the council from foreign mining companies and advocating for a clear regulatory framework. He also pointed out that Arkansan miners, unlike their foreign counterparts, have always supported local noise ordinances.
The rules require crypto mines to demonstrate that their operations will not harm utility providers’ ability to generate and transmit electricity. These measures are designed to address concerns about the impact of energy-intensive crypto mining on local power grids, which have been raised both in Arkansas and across the nation.
Ongoing Concerns Over Enforcement
While the draft rules mark significant progress, not all lawmakers are convinced. Senator Bryan King, who was an early critic of the 2023 legislation, expressed frustration over what he views as lenient financial penalties for violations. “To me, it looks like a lot of just superficial show stuff. It’s not impactful,” King said. He also warned that even if the regulations are enacted, legal challenges could arise from industry opponents seeking to delay or overturn the rules.
“Look at the crypto industry right now. They’re spending huge amounts of money to get what they want, the way they want it,” King added, expressing concern over the influence of industry spending on regulatory outcomes.
As the finalization of the rules nears, Arkansas finds itself at a pivotal moment in balancing economic growth with the need for robust oversight of its burgeoning cryptocurrency mining sector.
Conclusion: A New Era for Crypto Regulation in Arkansas?
With Governor Sanders’ approval pending, Arkansas is moving toward a new era of cryptocurrency regulation. While the state government and industry leaders may be aligned on some aspects, the ongoing debate underscores the complex challenges of managing a rapidly evolving sector with significant implications for local communities and infrastructure. Whether the new regulations will strike the right balance remains to be seen, but one thing is certain: the path to crypto regulation in Arkansas is far from over.
