Within the European Union, there are growing voices in favor of a ban on cryptocurrency mining. Why exactly? And would such a restriction make sense?
In November 2021, two Swedish supervisory authorities, the Danish Financial Supervisory Authority and the Swedish Environmental Protection Agency, published a letter asking the EU to ban cryptocurrency mining. They mentioned all sorts of reasons why they thought this would be to the benefit of the European Member States and its citizens. For example, the social benefits of cryptocurrencies are said to be ‘questionable’, the disadvantages to consumers ‘significant’, and digital cryptocurrencies are often used for illegal purposes, such as money laundering and terrorist financing.
But their main argument? The climate. The current technology behind crypto mining, including Bitcoin, for example, works on the basis of ‘proof of work’. Cryptominers must perform complex mathematical calculations in order to mine a block in the system. Performing the calculations is ‘the work’ and the solution is the ‘proof’. This rewards them with some crypto after completing the task. However, the miners need more and more expensive hardware for this. It is also still intensely busy, making cryptocurrency mining an energy-intensive task.
According to the Swedish authorities, the big problem lies in that. Sweden is strongly committed to renewable energy, and increasing cryptocurrency activities could potentially force the country to switch back to more fossil fuels. Because they do not believe it is a wise use of renewable energy, they are asking for a ban on the proof of work system, as Bitcoin and Ethereum now e.g. In addition, they also want new cryptocurrencies that use these methods to be stopped, and companies that trade in cryptocurrencies should no longer describe themselves as ‘sustainable’.
If it ever went in the direction of a concrete ban, the EU would not be the first to introduce such a legislator. There are now a lot of countries that have very limited cryptocurrencies. According to the US Law Library of Congress, there are currently 42 countries that have regulated trading in digital currencies in such a way that this has become virtually impossible. Nine countries, namely Algeria, Bangladesh, Egypt, Iraq, Oman, Morocco, Qatar, Tunisia and China, have simply banned cryptocurrencies. China itself has long been a frontrunner when it comes to cryptocurrency mining, but last year Beijing pulled the plug on the crypto image.
It has been known for some time that cryptomining uses a lot of energy. It is therefore part of the basis of the Chinese Government’s decision to ban these activities. This country had been struggling with energy shortages in certain regions for some time and was hoping to solve this problem (or partially). The main question, therefore, is whether we as a society should continue to focus on this anti-ecological piece of technology. Of course, it does not pay off that we are all increasingly engaging in environmentally friendly alternatives to pretty much everything in our daily lives if we address this in an instant by the fact that everyone wants a packed digital wallet.
We could undoubtedly argue for hours about the value of cryptocurrencies, but what seems to me more interesting here is the actual validity of the concept. The crypto market consists of a large selection of different coins, each of which claims to have a practical application, but no one really thinks about it anymore. The valuation of the original coins has given way to a speculative concept. For many people, it seems like an attractive thing to invest in, hoping to make the necessary profit sooner or later. The success that Bitcoin has known, for example, seemed to many people to be the promise that they could also make a lot of money from it.
The fact that the vast majority of the crypto market is coming down to gambling should give us some concern. Of course, this is also the case with the ordinary stock exchanges, but we can say that the traditional stock market remains much more tangible than that of the cryptocurrency. Crypto enthusiasts will soon point out the full range of benefits that cryptocurrencies bring, including the power of the decentralized network and all the quirks it brings to everyday citizens.
They have a point there that we should not just ignore. It is faster, international, more inclusive and private, and the markets are always open. However, we wonder how many of these cryptocurrencies are actually used to buy products and services, and how many are left in the hands of people who speculate and play with them.
Is a ban the solution?
Is it necessary from an ecological point of view to ban cryptocurrencies completely? It seems too strong for me. As I mentioned, there are actually a whole host of benefits associated with it which definitely provide added value. What seems important to me is that we must not become completely blind to risks and realize that, as with almost all other technology, there are also disadvantages. But if the benefits turn out to be so small, and the disadvantages for the climate too great, then it may not be unwise to put the brakes on it, or at least look for climate-friendly solutions. Because no cryptocurrency is worth risking our environment.