Sweden’s FI calls for ban of energy-intensive crypto mining

“Crypto-assets are a threat to the climate transition” has warned the Swedish markets regulator.

The Swedish FI reminded that mining for crypto-assets requires immense amounts of electricity and produces substantial CO2 emissions. Producers of crypto-assets, who have a growing presence in the Nordic region, are interested in using more renewable energy. However, the regulator pointed out that the renewable energy is needed for their essential services and if their consumption is increased by the crypto miners, it threatens Sweden’s ability to meet the Paris Agreement.

For this reason, the director generals of both the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency have recommended that energy-intensive mining of crypto-assets should be banned.

The regulator expressed concerns about the benefits of cryptocurrencies and the issues associated with them.

The official statement said:

The social benefit of crypto-assets is questionable. The Swedish Financial Supervisory Authority, like other international organisations such as the International Monetary Fund and the US Federal Reserve Board, considers that there are aspects of crypto-assets that are problematic. 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.

It has been estimated by the the University of Cambridge and Digiconomist that the two largest cryptocurrencies Bitcoin and Ethereum, together use nearly twice as much electricity in a year as the whole country of Sweden. This is attributed to the nature of the cyrpto mining process which requires a proof of work. Miners must solve an encryption puzzle by running heavy computer programs and the winners receive crypto-assets as a reward. With the increasing numbers of competing crypto miners, the demand for electricity soars.

With the growing value of cryptos such as Bitcoin, so does the incentive to join the mining process. This in turn increases the difficulty of the encryption puzzle and the electricity consumption of individual miners.

Digiconomist has estimated at the current market value of cryptos, they will lead to releasing of up to 120 million tons of CO2 per year which is equal to 100 million round-trip flights between Sweden and Thailand.

Crypto mining often is conducted in countries with low energy prices and a high share of fossil-dependent electricity production. The growing value of Bitcoin also extends the life of old fossil-based energy producers.

Since China’s recent crackdown on Bitcoin, crypto-miners are turning their attention to the possibility of renewable energy and the Nordic region.

The Swedish financial markets regulator expressed fears that, as a result of the extensive mining of crypto-assets in Sweden, the renewable energy available to the country may be insufficient to cover the required climate transition the country needs to make.

The regulator said:

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.

The Authority has asked the EU to consider a ban of this energy-intensive mining method proof. It estimated that other methods of crypto-assets production, which can be used for Bitcoin and Ethereum, reduce energy consumption by 99.95% with maintained functionality.

The regulator highlighted 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.”

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