Venture advisor for Presight Capital Patrick Hansen shared the results of three new research articles on Bitcoin and crypto’s climate risk, decentralized finances (DeFi), and stablecoins. Published by the European Central Bank (ECB), the articles highlight the approach adopted by the financial institution regarding the nascent asset class.
The ECB research compared Bitcoin mining with someone driving a fossil fuel car. In that sense, they claimed public authorities have the option of incentivize it, imposing a carbon tax on it, or banning it. The research claims the latter is very probable.
As seen below, the research claims Bitcoin mining consumes more energy than Netherlands, Spain, Austria, and other massive sources of energy. The BTC mining consumption, as presented by the ECB, has been increasing electricity consumption over the years.
In 2022, the Bitcoin Mining Council (BMC) published a report on this blockchain’s energy consumption. In contrast to the report published by the ECB, this organization claims the Bitcoin mining industry is one of the most sustainable in the world with the rapid adoption of clean energy.
As seen below, members of the which comprised over 50% of the Bitcoin hashrate have a sustainable power mix larger than most countries in the world. Overall, BTC mining consumes less than 0.1% of global energy with 247 terawatts per hour (TWh).
However, Hansen claims the European Union will take action on what they consider to be the “fossil fuel” driven blockchain and its mining industry. According to the report:
It is highly unlikely that EU authorities will restrict/ban fossil fuel cars by 2035 but refrain from taking action for assets whose current yearly carbon emissions are enough to negate most (..) countries’ emission savings & (..) global net savings from (..) electric vehicles.
How The European Central Bank Plans To Regulate Bitcoin
The European Union and its central banks are getting ready to introduce a new regulation for Bitcoin and cryptocurrencies. The financial institution wants to regulate the nascent asset class “in-depth” with the implementation of two regulations packages called Regulation on Markets in Crypto Assets (MiCA).
The first version of this package is set to come into law as soon as 2024. The second version is still in development but might include a mechanism to regulate Bitcoin and the entities maintaining its blockchain, DeFi, and other crypto intermediaries. The president of the ECB Christine Lagarde said:
MiCA 2 should fully cover decentralized finance (DeFi), currently the focus in on financial intermediaries. Where no intermediary exists, the regulation doesn’t apply, and that is the case for Bitcoin. So Bitcoin won’t be cover by MiCA 1, but hopefully for MiCA 2 you will take that into account.
Lagarde, other members of the ECB, and members of international regulators, politicians, and financial institutions converged on one point: Bitcoin and cryptocurrencies are becoming a risk to the financial system, and consumers.
Related Reading | Investor Sentiment Nosedives As Crypto Market Sheds $50 Billion
However, some experts believe MiCA 2 goes one step too far in regulating the nascent asset class. The first iteration of this package offers a framework and could provide crypto companies with clear rules. The second might simply pursue the control of the underlying assets.
…a spoonful of your daily nightmare fuel…
… ECB President Christine Lagarde calls for the EU to pass a “MiCA 2” directly regulating Bitcoin and other decentralized technologies (rather than merely regulating crypto-asset intermediaries (as “MiCA 1” does))…
— _gabrielShapir0 (@lex_node) June 21, 2022