The Biden administration is working on a set of policy recommendations targetting bitcoin and crypto’s sky-high energy consumption and carbon footprint, according to a report.
The bitcoin network’s blistering energy consumption is the subject of increasingly intense scrutiny from environmental activists and regulators around the world. In March, European Union documents revealed the extent of anti-bitcoin sentiment among officials—and their desire to push bitcoin toward a less energy-intensive mining model, such as the one ethereum is moving towards.
Now, as the price of bitcoin, ethereum and other cryptocurrencies brace for an economic “hurricane,” one White House official has said “climate and energy” need to be considered when developing digital assets such as bitcoin and ethereum.
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“It’s important, if this is going to be part of our financial system in any meaningful way, that it’s developed responsibly and minimizes total emissions,” Costa Samaras, principal assistant director for energy for the White House Office of Science and Technology Policy, told Bloomberg Law. “When we think about digital assets, it has to be a climate and energy conversation.”
The study, which will reportedly “drill down” into both the positive and negative aspects of bitcoin and crypto, is due to be released in August, according to Samaras.
“We’ve seen reports about noise, local pollution, older fossil generators being restarted in communities,” Samaras said. “These are not trivial loads.”
Last year, a strict bitcoin, ethereum and crypto crackdown in China caused the country’s miners to flee abroad and sparked a disastrous price crash that wiped trillions of dollars from the crypto market.
Bitcoin and other similar cryptocurrencies that use the so-called proof-of-work consensus mechanism require a large amount of energy that’s increased dramatically in recent years as the technology has become more popular and the bitcoin price has surged. Bitcoin miners secure the network and validate transactions by directing computing power toward it in return for newly created coins.
As the bitcoin price has rocketed higher, so has the bitcoin network’s electricity demands with the process of securing the network, confirming transactions and minting new coins thought to use a similar amount of electricity annually as some small countries.
Ethereum, the second-largest cryptocurrency after bitcoin, has begun the process of transitioning to the less energy demanding proof-of-stake mining model that allows cryptocurrency holders to “stake” their coins on the network to secure it, confirm transactions and create new coins. Ethereum’s long-awaited upgrade was begun late last year and could be completed in a matter of months.
“We need to think about what would be the appropriate policy responses under a world that shifted to proof-of-stake, or a world that has some continuous mix of proof-of-work and proof-of-stake,” Samaras said. “Proof-of-work is energy-intensive by design, but it also increases security.”
The report could be one of the first following president Joe Biden’s March executive order that directed federal agencies to get a handle on the fast-growing crypto market and industry and publish reports that could guide the administration’s policy decisions.