Crypto mines a noisy nuisance to some. Should Michigan regulate them?

• It’s difficult to say how many crypto mines exist in Michigan, because they’re not licensed by the state
• Pending legislation would make it easier to launch crypto mines in the state, including allowing mines to be built on abandoned natural gas wells
• One Upper Peninsula school had to cancel outside recess because a nearby mine is so loud

This spring, Lake Superior Academy had all its ducks in a row to build an addition to its Dafter Township campus that would allow the K-5 Montessori charter school to bring in 40 new students.

Then the Bitcoin mine across the street turned on.

“With the noise, we just couldn’t start the building,” said the school’s superintendent, Susie Schlehuber. “We had to call 40 parents. That was a huge setback for us.”

Crypto mines are essentially large, energy-hungry computer systems — sometimes covering hundreds of square feet — that try to solve complex equations to earn cryptocurrency.

Michigan has at least four large-scale crypto mines — three in the Upper Peninsula and one in Dowagiac, near Kalamazoo — but it’s difficult to say how many of the electricity-guzzling operations exist in the state. The state doesn’t directly regulate such mines, which can range from one computer in someone’s home working to mine a single crypto coin to a warehouse full of supercomputers trying to mine hundreds of coins at once. 

Bills introduced in Lansing would make it easier for crypto mines to launch in the state, in part by creating a so-called “cryptocurrency bill of rights” and by allowing crypto miners to tap state-owned oil and natural gas wells to power their operations.

Dig deeper: Crypto mining comes to Michigan. How does it work?

But Lake Superior Academy’s experience shows such mines aren’t always good neighbors, leading some Michiganders to call for expanded regulations.

“It’s going to be exciting to see what (cryptocurrency) brings to us in the future,” Schlehuber said, but “for them to choose directly across from a preschool to fifth-grade elementary nature school … there’s just no logic in it.”

Bridge Michigan could not reach the company behind the mine across the street from the school, but one of the affiliated companies, Alpha Watt, told My UP Now that the company is “excited to continue working with Lake Superior Academy to ensure Dafter remains a safe and friendly place to live and learn, as well as working with the community and invest locally for everyone’s benefit.” 

‘The foundation of our entire financial lives’

Cryptocurrency — digital currency created by solving complex equations — has been around since 2009, when an anonymous programmer or group of programmers publicly released Bitcoin. While numerous other digital currencies have since sprung up, Bitcoin remains the most popular.

Not backed by any government’s central bank, cryptocurrency only has value because its users give it value. Bitcoin currently trades at about $118,000 per coin, compared to about $9,000 five years ago.

Users can obtain crypto coins two ways: They can purchase it on an open market similar to the stock market, or they can create a coin — also called mining — by using computers to solve the complex equations that underpin the currency.

Largely unregulated and anonymous, crypto initially raised concerns it could be used to fund criminal enterprises or terrorist networks. But it has become increasingly mainstream, with stores such as Starbucks and The Home Depot accepting crypto as payment and some government entities — including Michigan’s state pension system — investing in crypto markets.

President Donald Trump, who sells his own crypto coin, has established a federal Bitcoin reserve. Congress is expected to vote this week on a slew of crypto-related bills, including one that would require a type of coin called “stablecoin” to be backed by liquid assets such as the US dollar. Crypto proponents hope the legislation will instill more confidence in crypto and help the currency more broadly enter mainstream markets.

In Michigan, a bipartisan group of state House lawmakers has put forth a package of bills that backers hope will ramp up the use of and creation of cryptocurrency in the state.

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The bills, stuck in committee since May, would, among other things, explicitly allow crypto infrastructure such as mines in the state, forbid the state or local governments from banning crypto or taxing it differently than traditional money, put guardrails on the state government’s crypto investments, and allow crypto mines to operate at the state’s more than 500 “orphan” oil and natural gas wells.

“I believe that, 15, 20 years from now, (crypto) will be the foundation of our entire financial lives,” said one of the bill sponsors, state Rep. Bryan Posthumous, R-Rockford. “I wanted to get ahead of the curve, be a little proactive, and start laying the groundwork.”

Nate Talbot, executive director of the Detroit Blockchain Center, which educates people about cryptocurrencies and provides some related services to business startups, said he’s leery of too much crypto regulation. He said lawmakers should define the currency in law and see what existing financial rules could apply. 

“It can’t be a renegade asset,” Talbot said. “Nothing in crypto can be that and be adopted on a mass scale, so there has to be a balance in it.

But, he said, “We don’t make new regulations because they make a $2 bill … Why would this be different?”

‘You do see a lot of problems’

Talbot conceded large-scale mining operations can cause issues with their neighbors.

“You do see a lot of problems,” he said. “Some are justifiable and some are more about the reputation that mining has accumulated over the years.” 

Crypto mines require a lot of energy. Mining a single Bitcoin takes as much electricity as it takes to power an average US household for 41 days, according to the Bitcoin Energy Consumption Index run by Digiconomist. Around the world, Bitcoin mines use as much energy as the entire nation of Poland, and as much water as the entire nation of Switzerland. 

In the Upper Peninsula, three crypto mines — one in Newberry and two in Dafter — operate within the service area of Cloverland Electric Cooperative, spokesperson Abby Moran said in an email to Bridge. They’ve been a net positive for the nonprofit utility and its customers, she said.

Cloverland has ample capacity to service the mines, Moran said. The mines run on an interruptible rate, meaning they must shut down during peak demand for the grid. The mines add to a shrinking customer base for the utility, helping to offset rising infrastructure costs.

“Without their large, consistent load, members would face significantly higher rate increases,” Moran said.

Posthumous, the lawmaker, said the pending legislation that would allow the mines to tap into abandoned wells for power would alleviate the pull on the electric grid.

Posthumous said local governments’ zoning rules and noise ordinances should mitigate any problems between residents and the mines.

But Andrea Brown, executive director of the American Planning Association Michigan Chapter, said crypto mines are so new that local governments haven’t yet figured out how to deal with them. 

“From what we understand, the zoning for it is pretty ambiguous since it's new and municipalities have not clarified whether crypto mining is industrial, commercial, requires permits or not, treated as a warehouse, etc.,” Brown said in an email to Bridge Michigan. 

Michael Selden, director of member information services for the Michigan Townships Association, said many townships do not have any zoning that could regulate where crypto mines operate, though they may have noise ordinances that could require the mines to control the sound they emit. He said townships could also require special-use permits for the mines, which would allow the township board to require berms or insulation to keep the sound down.

Selden said the association generally prefers the state leave such issues to local governments to handle.

“From a general standpoint, we would be in favor of keeping local control on things to regulate locally based on what the necessities are,” he said.

‘Ugly doesn’t hurt us’

Large-scale crypto mining can happen without issue.

In Dowagiac, Sentium Inc., a subsidiary of a Las Vegas-based company, mines hundreds of Bitcoins a year from inside an abandoned factory. Housed inside an industrial park, the facility’s earned no complaints from residents, said Dowagiac City Manager Kevin Anderson.

In fact, “they were able to bring some new life back into a building that needed some TLC,” Anderson said. “It’s just not an issue.” 

Sentium did not respond to requests for comment.

In the Upper Peninsula’s Dafter Township, however, Lake Superior Academy noticed a problem as soon as the mine across the street went live in March. The computers for the mine operate outside in metal pods on about 10 acres just across the street from the school.

The constant din of the computers humming and the constant whirring of the fans used to cool the computers registered higher than 70 decibels — equal to a vacuum cleaner running or the sound of heavy traffic — all the time, Schlehuber said.   

The school specializes in nature education and students typically spend a lot of time outdoors, the superintendent said, but neither teachers or students could concentrate with all that noise and classes had to be moved indoors. Even behind the school, farthest from the mine, sound readings hit 60 decibels — about as loud as a running dishwasher — and the noise interfered with an app the school uses to identify birdsongs.

“It is very ugly, but ugly doesn’t hurt us,” Schlehuber said of the mine. “The noise is what is impacting the school.”

The township was no help. The local noise ordinance limiting sounds to 50 decibels applied specifically to wind turbines, Schlehuber said, and the township had nothing on the books applying to crypto mines or data centers.

Township Supervisor Bob Brown did not respond to multiple messages seeking comment.

The company behind the mine, Odessa Partners, promised improvements at community meetings and recently installed about 200 hay bales around the mining center to dampen the noise.

That helped, Schlehuber said. The company told My UP Now decibel readings at the school dropped to about 40 decibels, about the same as a refrigerator or a quiet office.

“At the same time we’ve been working with a number of local Michigan engineers to develop long term strategies that are both environmentally friendly and add to the natural beauty of the landscape here in the UP,” the company told My UP Now.

Earlier this month, the school won a temporary restraining order from the Chippewa County Circuit Court that prohibits the company from operating the mine across the street from the school at least until the next hearing on Aug. 13.