Swedish financial and environmental authorities have called for a wide ban on cryptocurrency mining in European Union (EU), saying that the environmental risks are significant and that crypto-assets are commonly used for criminal purposes, such as money laundering, terrorist financing, and ransomware payments. They also cited India’s and the US’s preparations to fix the unregulated crypto sector.
In the letter, Swedish government directors said crypto-producers are now turning their attention to Nordic countries, as taxes for mining-related activities are favorable, and there’s good access to cheaper renewable energy. In Sweden, electricity consumption for Bitcoin mining now accounts for 1 TWh annually, which equals the energy consumption of 200,000 Swedish households.
According to the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency, cryptocurrency mining also threatens targets to limit global warming to 1.5 degree Celsius under the 2015 Paris Agreement.
While it’s much better for companies to mine crypto using renewables instead of fossil fuels, the directors said this risks that there wouldn’t be sufficient renewables to cover the climate transition countries have to make. Clean energy is “urgently required” to develop fossil-free steel, manufacture batteries on a large scale, and electrify the transport sector, they argue.
The scale of the problem should not be underestimated. The University of Cambridge and Digiconomist assesses that the two largest crypto-assets, Bitcoin and Ethereum, together use around twice as much electricity in one year as the whole of Sweden. Furthermore, Digiconomist estimates that crypto-assets at their current market value lead to a release of up to 120 million tonnes of CO2 in the atmosphere per year.
“To get a better sense of this number, we can compare it with emissions from long-distance flights. Using the aviation industry’s own data from ICAO Carbon Emissions Calculator and adding the high elevation effect shows that the emissions from the two largest crypto-assets today is equal to 100 million round-trip flights between Sweden and Thailand,” said Bjorn Risinger, Director General at the Swedish Environmental Protection Agency.
The reason for the industry’s large carbon footprint is that most crypto-production takes place in countries with low energy prices and a high share of fossil-dependent electricity production. Moreover, since the value of Bitcoin has increased so much, this has also extended the life of old fossil-based energy producers, the authorities noted.
In their letter, the directors said EU countries could also introduce a tax on energy-intensive Bitcoin production and communicate the climate problems related to crypto-assets more widely. Nevertheless, these options won’t likely address the “environmental harm we see” from crypto mining today – calling instead for a larger ban.
“It is important that Sweden and the EU lead the way and set an example in order to maximize our chances of meeting the Paris Agreement. We should also strongly encourage other countries and regions to follow suit,” the open letter read.
Earlier this year, the EU adopted new and more ambitious climate targets to tackle climate change, with a pledge to make them legally binding soon. The legislation, agreed between member states and the EU Parliament, says the bloc will cut its emissions by at least 55% by 2030. Still, the Parliament had initially asked for a 60% reduction.
Meantime, in India, the upcoming Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, seeks to prohibit most private cryptocurrencies in the country.