A senior regional regulator said Wednesday, Jan. 19, that the European Union urgently needs to restrict a kind of cryptocurrency mining that relies largely on renewable energy and jeopardizes climate-change objectives.
“The answer is to prohibit ‘proof of work,'” said Erik Thedéen, vice-chair of the European Securities and Markets Authority, in an interview with the Financial Times.
He was referring to one of the major techniques of validating bitcoin transactions, which has been criticized for wasting too much energy due to its competitive approach of confirming transactions, which involves several miners attempting to solve cryptographic problems. The newer “proof of stake” approach employs fewer, randomly chosen miners.
“Proof of stake has a substantially lower energy footprint,” Thedéen said, adding that in his home country of Sweden, officials discovered that a growing percentage of bitcoin mining was utilizing renewable energy. “We need to have a conversation about transitioning the sector to a more efficient technology,” he added.
Last year, China outlawed cryptocurrency activities, including mining, citing concerns ranging from money laundering to environmental and energy issues. Meanwhile, Swedish officials asked for a stop to “energy-intensive mining of crypto assets” in November 2021, claiming that it jeopardized the country’s capacity to reach Paris Agreement targets.
The European Parliament has suggested requiring corporations to report cryptocurrency-related energy use, while the Crypto Climate Accord is a private-sector effort to solve the problem.
Melanion Capital’s founder and CEO, Jad Comair, responded to the Swedish regulator’s charges in an email to MarketWatch. Melanion Capital is a French asset manager that established a bitcoin-themed exchange-traded fund in Europe last year called Melanion BTC Equities Universe UCITS ETF.
Comair advised Thedéen to study Melanion’s most recent bitcoin transition research, which “demonstrates Bitcoin’s sustainability by tackling the issue through the lens of the United Nations’ Sustainable Development Goals, which were established in 2015.”
Europe has suffered over the last year, notably with power shortages that have necessitated the use of older, dirtier fuels at times. Inflationary pressures dragged on consumers and businesses last year, and they threaten to continue this year, with governments spending billions to give relief.