A report titled “Mining the environment – is climate risk priced into crypto-assets?” was published on July 12 by the European Central Bank (ECB). As inflation in Europe and all over the globe keeps soaring, the bank has shed a light on some of its other concerns— in this case, Crypto mining. It says it’s has some serious concerns about “significant carbon footprint” of Bitcoin (BTC) and other cryptocurrency mining, which generally consumes a lot of energy.
The research group responsible for this report has reinforced concerns about the environmental impact of crypto mining. They have also put forward a narrative that proof-of-stake (PoS) is the only sustainable crypto mining option, in contrast to proof-of-work which is considered as a threat to the plant by the bank.
Authors have considered both Bitcoin and tokens based on the Ethereum blockchain, including stablecoins like Tether (USDT) as unsustainable, which disturbs the green transition project. Ethereum recently completed its first few steps to transition from PoW mining to PoS mining, while renaming itself to Ethereum Merge.
The report has raised tensions between pro crypto and pro environment crowd. Social and political choices on energy consumption levels and energy sources could lead policymakers to bar certain activities which are productive, risking crypto-assets valuation.
“It is difficult to see how authorities could opt to ban petrol cars over a transition period but turn a blind eye to bitcoin-type assets built on PoW technology.”
The ECB recently published another report investigating the growth of the cryptocurrency market over the course of last ten years and the dangers it postures to the current financial system. It inferred that an absence of administrative oversight added to the new defeat of algorithmic stablecoins ecosystems like Terra (LUNA), showing the impacts such stablecoins could have on the financial system.