Swedish authorities have called for an EU-wide ban on energy-intensive cryptocurrency mining, which they say threatens targets to limit global warming to 1.5 ° C in under the 2015 Paris Agreement.
In an open letter to the European Union, Erik Thedéen, director of the Swedish Financial Supervisory Authority, and Björn Risinger, director of the Swedish Environmental Protection Agency, warned that the mining of cryptocurrencies like Bitcoin and Ethereum had triggered an increase in energy consumption in the country amounting to “several hundred percent”.
This cryptocurrency mining increasingly relies on Sweden’s renewable energy sources, which Thedéen and Risinge say are “urgent for the development of fossil-free steel, the manufacture of batteries to scale and electrification of our transport sector ”, as well as other essential services. .
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China’s recent crackdown on cryptocurrencies – which includes an outright ban on all activity related to issuing or trading virtual tokens or running cryptocurrency exchange businesses – has seen the producers turn their attention elsewhere.
This includes the northern region, where prices and taxes are more favorable and where there is an abundant supply of renewable energy to harness.
“If we were to allow extensive mining of crypto-assets in Sweden, there is a risk that the renewable energy we have will be insufficient to cover the required climate transition that we must make,” warn Thedéen and Risinge.
The letter specifically calls for a Europe-wide ban on the cryptocurrency mining mechanism known as “proof of work”, which involves contributing computer processing power to solve mathematical puzzles on the network and validate transactions on the blockchain.
On the Ethereum network, the computational efforts required to complete transactions are called “gas,” the cost of which is set by miners based on supply and demand on the network. The more powerful the computer, the more likely it is that a miner will receive a coin.
But this process also requires a huge amount of energy. According to Thedéen and Risinge, electricity consumption for Bitcoin mining in Sweden now stands at 1 terawatt-hour (TWh) per year, the equivalent of the electricity needed to power 200,000 homes.
“It is currently possible to drive a mid-size electric car 1.8 million kilometers using the same energy it takes to mine a single Bitcoin,” they say. “That’s the equivalent of forty-four world tours. Nine hundred Bitcoins are mined every day. It’s not a reasonable use of our renewable energy.”
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A number of policy options are offered by Thedéen and Risinge to curb energy-intensive cryptocurrency mining, including taxes on cryptocurrency production and better communication on its environmental impact. However, they note that none of these options address the immediate problem, especially “given the rapid growth and demand for cryptoassets.”
The letter therefore calls on the EU to introduce measures to stop the production of crypto-mining that use energy-intensive methods, and for legislation to prevent companies that trade and invest in crypto assets from describing themselves or describing themselves. their business as environmentally sustainable.
While this could lead to the relocation of cryptocurrency producers to countries with a friendlier position on cryptocurrencies but little or no access to renewable energy sources, Thedéen and Risinge say “it is important that Sweden and the EU are leading the way and leading by example in order to maximize our chances of complying with the Paris Agreement “, and they call on other world authorities to follow suit.
They add: “A ban on the proof-of-work mining method in the EU could be an important first step in a global move towards greater use of more energy-efficient cryptocurrency mining methods. .
“It would also mean that our renewable energy is used as efficiently as possible to support the transition to climate neutrality.”