Arkansas lawmakers on Wednesday gave final approval to two bills regulating cryptocurrency mining operations in the state and delivered them to the governor’s office to be signed into law.

Both bills are meant address what proponents say are shortcomings in 2023’s Act 851, the Arkansas Data Centers Act, which bars local governments from regulating crypto mining operations.

Act 851 passed easily in 2023’s regular session but has since come under fire for allowing crypto mines to operate without sufficient oversight. Many members of the General Assembly say that they didn’t fully understand aspects of the law when it was passed.

Crypto mines face widespread criticism for the loud noise that they often produce as well as the large amounts of water and electricity they consume.

Many lawmakers voiced worry that the facilities could put a strain on already overtaxed aquifers, hurting farmers, and potentially overburden the energy grid.

Some lawmakers voiced concerns about cybersecurity risks related to foreign ownership.

The intense backlash to the passage of Act 851 has now led to the passage of the first major pieces of substantive non-budget legislation ever passed during a fiscal session, according to several lawmakers.

The final passage in the House on Wednesday comes after the sponsors of the two bills appeared before a legislative committee Tuesday for a final round of questioning and debate.

Rep. Rick McClure, R-Malvern, and Sen. Joshua Bryant, R-Rogers, the sponsors of Senate Bill 78, as well as Sen. Missy Irvin, R-Mountain View, and Rep. Jeremiah Moore, R-Clarendon, the sponsors of Senate Bill 79, fielded questions from members of the House City, County and Local Affairs Committee.

Most agreed that something had to be done to address the many disparate concerns related to crypto mining and the bills were an acceptable start, though there was not a consensus that the bills presented a perfect or permanent solution.

Noise reduction in new bills

Senate Bill 78 requires crypto facilities to use noise reduction, listing methods such as liquid cooling, submerged cooling, building at least 2,000 feet from the nearest building or “fully enclosing the envelope” — meaning building solid walls on all sides of the crypto mine.

The bill also requires noise reduction and bans crypto operations from using water to cool their servers.

Some lawmakers, including Rep. Tippi McCullough, D-Little Rock, and Rep. Andrew Collins, D-Little Rock, pointed to language they said didn’t require these specific noise mitigation measures explicitly enough. They said the language is ambiguous as to whether other noise reduction might also technically meet the letter of the law.

McCullough asked whether the bill mandates the specific types of noise reduction listed, or might “open it up to maybe just putting some cotton balls outside the walls and saying ‘we tried to reduce the noise.’”

Bryant said the bill should be read to mean that noise reduction must be as effective as those methods.

Foreign ownership barred

Both bills would bar many foreign nationals from owning any interest in crypto mining.

Nationals of countries on the list of countries subject to the International Traffic in Arms Regulations would not be able to own a stake in a crypto mine.

Bryant and Irvin worked together to merge the sections of SB 78 and SB 79 regarding foreign ownership so that they are compatible. Bryant lowered the percentage stake that a foreign national can own from 15% to 0% in order to match SB 79.

Bryant said that using the list of countries in the regulations as opposed to barring nationals of particular countries was not a perfect solution but an efficient one.

“[As] a legislative body, we don’t have time to react to everything that’s happening in the world. Is it the best way to handle it? I’m not sure. But as it’s been said, we just don’t know and this is a step to try to control that.”

An owner of a crypto mine whose country is added to that list would have to divest from the mine, Bryant said.

Hobby mining allowed

Bryant said that under SB 78, crypto mining would be allowed as a hobby “within the four walls of the castle of your home.”

A handful of lawmakers asked how home crypto mining would be defined and differentiated from commercial crypto mining. Bryant and Entergy’s Director of Public Affairs John Bethel said that the scale of crypto mining out of a residence will be necessarily limited by the constraints of residential grade electrical service.

“It’s almost like going to the diamond mines out here and having a good fun day, and you might get lucky that day, versus buying a diamond mine with all the equipment, all the employees and everything else. It’s just two different things,” McClure said.

Skepticism and criticism

“These are really stopgap bills until we get to the ’25 general session?” asked Rep. Carol Dalby, R-Texarkana.

Bryant agreed, saying that “there’s going to be a lot more discussion unfolding in 2025 and also between now and then.”

Rep. David Ray, R-Maumelle, said of SB 78: “Everybody can probably find something that they’re not 100% on board with but with the big issues as it pertains to this bill, those being noise, vicinity and foreign ownership, I think it address all the big things.”

Collins appeared to be the only “no” in the final voice votes that passed both bills.

“I think in a lot of ways, it’s positive,” he said of SB 78, but “the reason I have to be a ‘no’ on it is that it goes too far in taking away liberties. In restricting foreign ownership in this way, we are casting a net that is both too wide and too narrow. It’s going to catch people up who are totally innocent and it’s going to miss a lot of people who are either home grown or from one of the countries not on this list.”

“We can’t really put that back in the bottle if we pass this,” Collins said.

Others disagreed, saying that there would be opportunities to improve upon the legislation.

“We’ve got between now and January to work with the sponsors and with other members of this body and the Senate, to get us there,” said Rep. David Whitaker, D-Fayetteville. “The people who are calling me say at least get started… I urge you not to let the perfect be the enemy of the good.”

“I’m not sure whether we’re helping or hurting but I’m going to support it because I know we need to do something,” said Rep. Mike Holcomb, R-Pine Bluff.