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Cryptocurrency mining is taking such a large amount of renewable energy that it threatens to keep the European Union (EU) from meeting its Paris climate goals, Erik Thedeen, vice-chair of the European Securities and Markets Authority, said in a 20 January Financial Times interview.
The EU should ban the most common form of mining, Thedeen said, noting that the energy-intensive practice is already a “national issue” for his native Sweden “because of the amount of renewable energy devoted to mining.”
The EU should ban the so-called “proof of work” mining method and push crypto miners toward the alternative “proof of stake” model, he said.
In “proof of work,” miners compete to earn digital coins by solving complex mathematical problems, which requires intensive computer use and, therefore, a lot of electricity.
The alternative “proof of stake” allows miners to put up a stake of digital coins to claim the right to acquire more. The method requires less energy.
“We need to have a discussion about shifting the industry to a more efficient technology,” Thedeen said. “Proof of stake has a significantly lower energy profile.”
Bitcoin and Ethereum, the two most popular digital currencies, use proof of work.
Proof of work consumes 0.6 percent of the world’s energy and uses more electricity than the entire nation of Norway, according to the Cambridge Bitcoin Electricity Consumption Index.
Mining a single Bitcoin burns as much energy as driving a medium-size, gas-powered passenger car 1.8 km, or about a mile, a Cambridge University study calculated.
China outlawed proof of work in May, when the country was the global center of crypto mining. The ban dispersed the practice around the world.
The amount of computer power, and electricity, devoted to crypto mining is at record levels, according to trading platform Blockchain.com.
Last November, Sweden’s regulators posed the idea of banning proof of work, noting the increasing amount of green energy the industry is absorbing while pointing out that “the social benefit of crypto assets is questionable.”
“The financial industry and a lot of large institutions are active in cryptocurrency markets and they have responsibilities” related to sustainable environmental, social, and governance practices, Thedeen pointed out.
In November, Thedeen called on the EU “to consider an EU-level ban on the energy-intensive mining method proof of work.”
He was not suggesting an outright ban on crypto mining or cryptocurrencies, he emphasized.
Ethereum has announced it will migrate to the proof of stake mining model in June, the FT said.