Swedish authorities are calling on the EU to ban energy-intensive cryptocurrency mining ostensibly to make the world colder.
Erik Thedéen, the Director-General at the Swedish Financial Supervisory Authority, and Björn Risinger, the Director-General at the Swedish Environmental Protection Agency have called for a ban on the proof of work mining within the EU. “The social benefit of crypto-assets is questionable,” according to the directors of these Swedish government agencies. They wrote that their agencies, alongside the International Monetary Fund and the US Federal Reserve, consider aspects of cryptocurrency “problematic.”
The reasons provided in their open letter?
“The consumer risks are significant, and crypto-assets are commonly used for criminal purposes such as money laundering, terrorist financing, and ransomware payments. Crypto-assets also have a significant negative impact on the climate as mining leads to both large emissions of greenhouse gases and threatens the climate transition that needs to happen urgently. This is alarming, and crypto-assets therefore need to be regulated.”
Remember when Elon Musk tweeted that Tesla would accept Bitcoin payments once there was about 50% “clean energy usage” by miners? News outlets talked about how cryptocurrency was making everybody sweat too much and that miners needed to use only clean energy sources. Now Sweden is purportedly concerned about miners using too much of their clean energy. This makes it seem as if moving mining operations to clean or renewable energy sources is not the intention of this narrative.
Here are Sweden’s demands:
- The EU to consider an EU-level ban on the energy-intensive mining method proof of work. There are other methods for mining crypto-assets, that could also be used for Bitcoin and Ethereum, that are estimated to reduce energy consumption by 99.95% with maintained functionality.
- Sweden to meanwhile introduce measures that halt the continued establishment of crypto-mining production using energy-intensive methods.
- That companies who trade and invest in crypto-assets, that were mined using the proof of work method, cannot be allowed to describe or market themselves or their activities as sustainable.
The relevant part of the letter is below.
If we were to allow extensive mining of crypto-assets in Sweden, there is a risk that the renewable energy available to us will be insufficient to cover the required climate transition that we need to make. This energy is urgently required for the development of fossil-free steel, large-scale battery manufacturing and the electrification of our transport sector. Based on estimates from Cambridge University, it is currently possible to drive a mid-size electric car 1.8 million kilometres using the same energy it takes to mine one single bitcoin. This is the equivalent of forty-four laps around the globe. 900 bitcoins are mined every day. This is not a reasonable use of our renewable energy.
Our conclusion is that policy measures are required to address the harms caused by the proof of work mining method. It is important that both Sweden and the EU can use our renewable energy where it provides the greatest benefit for society as a whole.
There are several different policy options available. For instance, Sweden and other countries could introduce a tax on the energy-intensive production of bitcoin. Another option is to communicate more widely around the climate problems related to crypto-assets, in the hope that this will lead to both producers and investors demanding a shift to mining methods that require less energy. Given the rapid growth and demand for crypto-assets, neither of these options are likely to address the environmental harm we see from this mining method today. The emissions need to stop here and now, and renewable energy needs to be used for the climate transition of essential services.
We therefore call for:
The EU to consider an EU-level ban on the energy-intensive mining method proof of work. There are other methods for mining crypto-assets, that could also be used for Bitcoin and Ethereum, that are estimated to reduce energy consumption by 99.95% with maintained functionality.
Sweden to meanwhile introduce measures that halt the continued establishment of crypto-mining production using energy-intensive methods.
That companies who trade and invest in crypto-assets, that were mined using the proof of work method, cannot be allowed to describe or market themselves or their activities as sustainable.
There is a risk that these measures will lead to crypto-producers relocating to other countries, potentially resulting in overall higher emissions of carbon. But 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.
A ban on the proof of work mining method within the EU could be an important first step in a global move towards a greater use of more energy-efficient crypto mining methods. It would also mean that our renewable energy is used as efficiently as possible in order to support the transition towards climate neutrality.
Of course, Bitcoin mining requires a lot of energy. But, “Bitcoin’s absolute electricity consumption and carbon emissions are not significant in global terms, representing 0.04 percent of global primary energy consumption, 0.2 percent of global electricity generation, and 0.1 percent of global carbon emissions.”