EU regulators are also calling for a ban on energy-intensive crypto mining models, following China’s ban on virtual currency “mining” last year.
The European Union’s top financial regulator has renewed its call for a ban on the main mode of bitcoin mining across the EU, according to the Financial Times. Erik Thedéen, vice-president of the European Securities and Markets Authority, said bitcoin mining has become a “national problem” in Sweden. And warned that cryptocurrencies pose risks to meeting the climate change goals in the Paris Agreement.
Thedéen said European regulators should consider banning the “PoW” (Proof of Work) mining model. And push the industry to move to a “PoS” (proof-of-stake) model that uses less energy to reduce the industry’s massive electricity usage.
Swedish authorities warn that more and more renewable energy is being used for cryptocurrency mining
The two most traded cryptocurrencies, Bitcoin and Ethereum, are both adopting the PoW model. All participants in the blockchain digital ledger are required to verify transactions. The biggest problem with this mode is the huge power consumption.
Take Bitcoin as an example, since Bitcoin generates a block every 10 minutes, and gives block producers certain rewards and transaction fees as incentives. Therefore, “miners” who want to obtain high returns use all computing resources to perform uninterrupted hash operations. This results in a huge waste of energy.
According to Blockchain.com, cryptocurrency mining has become a lucrative and competitive business. The computing power dedicated to the process is at a record level.
According to the Cambridge Bitcoin Power Consumption Index, Bitcoin mining power consumption accounts for 0.6% of the world’s total energy consumption. It consumes more electricity than Norway every year.
He is also Director General of the Swedish Financial Services Authority and Chairman of Sustainable Finance at the international organization Iosco.
The idea of banning the practice was first floated by Swedish authorities in November last year, noting that more and more renewable energy is being used for cryptocurrency mining, while stating that “the social benefits of cryptoassets are questionable.”
The Swedish regulator, citing estimates from the University of Cambridge, also noted the amount of energy it takes to mine one unit of bitcoin. That’s equivalent to driving a medium-sized electric car for 1.8 million kilometers.
Thedéen warned that without intervention, a large amount of renewable energy will be used for Bitcoin mining. Instead of keeping traditional service industries away from coal energy, that would be an irony.
In the U.S., lawmakers are also exploring the impact of the energy consumed by Bitcoin mining. On Jan. 20, the U.S. Energy and Commerce Commission’s Subcommittee on Oversight and Investigations will hold a public hearing to explore the consequences of energy consumption generated by cryptocurrency mining operations, Coinphony reported.
Notably, Ethereum said it will move to a lower-energy PoS model in June. This model allows users to earn the right to record transactions based on how much they invest in the network.