The Swedish government is urging the European Union to prohibit energy-intensive cryptocurrency mining in order to mitigate global warming.
Erik Thedéen, Director General of the Swedish Financial Supervisory Authority, and Björn Risinger, Director General of the Swedish Environmental Protection Agency, have jointly advocated for banning proof of work mining activities across the European Union. They argue that the societal benefits of crypto-assets are dubious, a viewpoint shared by international bodies such as the International Monetary Fund and the US Federal Reserve, which view certain aspects of cryptocurrencies as problematic.
In their open letter, they emphasize that the predominant method of producing crypto-assets consumes vast amounts of electricity and results in significant CO2 emissions. Cryptocurrency miners, eager to utilize more renewable energy sources, are increasingly establishing operations in the Nordic region. However, this poses a threat to Sweden’s renewable energy resources critical for achieving climate transition goals outlined in the Paris Agreement. Therefore, they advocate for prohibiting energy-intensive mining activities associated with crypto-assets.
The excessive energy demands of crypto-asset mining, particularly the proof of work method used by major cryptocurrencies like Bitcoin and Ethereum, have been highlighted by the University of Cambridge and Digiconomist. This process involves solving complex encryption puzzles, which, when undertaken by numerous miners concurrently, significantly escalates electricity consumption and carbon emissions.
The directors argue that the growing popularity and value of cryptocurrencies like Bitcoin directly correlate with increased emissions. Digiconomist estimates that crypto-assets at current market levels contribute up to 120 million tonnes of CO2 annually, comparable to emissions from approximately 100 million round-trip flights between Sweden and Thailand.
The trend of crypto-mining shifting to regions with cheap energy and fossil-dependent electricity production underscores the urgent need for regulatory action to curb environmental impact. The directors warn that the surge in crypto-mining activities in Sweden threatens to deplete renewable energy reserves crucial for vital sectors like fossil-free steel production and electric vehicle infrastructure.
To mitigate these concerns, the directors propose policy measures, including an EU-wide ban on energy-intensive proof of work mining. They also recommend implementing measures in Sweden to discourage the establishment of energy-intensive crypto-mining operations. Additionally, they suggest restricting the marketing of crypto-assets mined using proof of work as sustainable.
While acknowledging potential challenges such as crypto-producers relocating to less regulated regions, the directors stress the importance of setting a precedent for climate-friendly practices in Sweden and the EU to align with the Paris Agreement goals. They advocate for promoting energy-efficient crypto mining practices globally to optimize renewable energy utilization and advance climate neutrality efforts.
