One of the EU’s top financial regulators has renewed calls for a “block” across the block of the main form of bitcoin mining and has sounded the alarm over the growing proportion of renewable energy devoted to cryptographic mining.
Erik Thedéen, vice-president of the European Markets and Securities Authority, told the Financial Times that bitcoin mining has become a “national problem” for his home country, Sweden, and warned that cryptocurrencies pose a risk to meeting exchange targets. climate change in the Paris agreement.
Thedéen said European regulators should consider banning a mining method known as “working test” and instead push the industry towards a less energy-intensive “participation test” model to reduce energy consumption. sector.
Bitcoin and ether, the two largest cryptocurrencies by volume, both rely on a working test model, which requires all participants in the blockchain digital ledger to verify transactions. Miners, who use extensive data centers full of fast computers to solve complex puzzles, are rewarded for recording transactions with newly minted coins.
This requires much more energy than the participation test model, where the number of parties signing the transactions is much lower.
“The solution is to ban work tests,” said Thedéen, who is also director general of the Swedish Financial Supervisory Authority and chair of sustainable finance at the international body Iosco. “The participation test has a significantly lower energy profile.”
Mining has become a highly lucrative and competitive business, with the amount of computing power devoted to the process operating at record levels, according to Blockchain.com. China banned the process in May, but the activity has spread around the world and there are now several companies listed on the stock market focused on the practice, such as Hut 8 in Canada.
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“We need to have a discussion about changing the industry to more efficient technology,” Thedéen said, adding that he did not advocate a wholesale ban on cryptography.
“The financial industry and many large institutions are now active in the cryptocurrency markets and have done so [environmental, social and governance] responsibilities, ”he added.
His comments came after Swedish authorities first launched the idea of banning the practice in November last year, noting the growing amount of renewable energy spent on cryptocurrencies while stating that “the social benefit of cryptocurrencies is questionable. “.
“[We call for] that the EU consider an EU – wide ban on the energy – intensive mining method as proof of work, “the Swedish financial regulator said in November.
Cryptocurrency mining is attracting more and more criticism for its impact on the environment. The practice accounts for 0.6 percent of the world’s total energy consumption and burns more electricity annually than Norway, according to Cambridge Bitcoin’s electricity consumption index data.
In the face of growing criticism and the ban in China, miners have increased the proportion of renewable energy they use to power their computers and introduced themselves to countries with a lot of wind and solar energy, such as Sweden and Norway.
“Bitcoin is now a national problem for Sweden because of the amount of renewable energy devoted to mining,” Thedéen said.
Without intervention, he warned, a significant amount of renewable energy would go to create bitcoin units instead of moving traditional services away from coal-fired energy sources.
Swedish regulators, citing estimates from Cambridge University, also noted that extracting a single unit of bitcoin consumes the same amount of energy as driving a medium-sized electric car for 1.8 million kilometers.
“It would be an irony for wind power generated on Sweden’s long coastline to be devoted to bitcoin mining,” Thedéen said.
Ethereum, the second largest digital asset, said it will migrate to the participation test model in June.
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