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Crypto assets and climate change – it’s complicated – Fin Tech

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On September 8th, the White House released a report (“Climate-Crypto Report”) on climate and energy impacts of crypto assets in the United States, which was followed by a detailed fact sheet summarizing the findings of the report. The climate crypto report was prepared following President Biden’s Executive Order 1407 of March 9, 2022, which mandated the study of the impact of distributed ledger technologies (“DLT”) on energy transactions and ultimately the environment.

The Climate-Crypto Report addressed four questions: (1)
how digital assets influence energy consumption and grid management? (2) what is the scale of climate, energy and environmental impacts of digital assets? (3) what are possible uses of DLT that could support climate monitoring? and (4)
what critical political decisionsis innovation and research needed to mitigate the environmental impact of digital assets?

The report recognizes that President Biden’s administration, while setting policies for responsible development of US digital asset markets, has also recognized the rising cost of US energy infrastructure and the impact on the environment when you consider it that mitigating climate change is also one of President Biden’s top priorities.

First, the Climate-Crypto Report finds that crypto assets consume a significant amount of electricity — globally equivalent to the amount of electricity consumed by Argentina or Australia. It was also noted that not all crypto-asset technologies consume the same amount of power, with Proof of Work (“PoW”) mechanisms far exceeding the power consumption of Proof of Stake (“PoS”) processes.

Second, the Climate-Crypto Report found that anthropogenic greenhouse gas (“GHG”) emissions related to crypto-asset markets have significant environmental impacts. In addition to increasing demand on the power grid, the generation of crypto assets also generates noise pollution, water pollution and many other environmental pollutants.

Third, the report also finds that there are broad and diverse applications of DLT in environmental markets, better resource coordination, and supply chain management.

Finally, the Climate-Crypto Report recommends reducing associated greenhouse gas emissions, reducing power-intensive technologies (like PoW) in favor of lower-impact PoS processes, and working to avoid negative impacts on underserved and overburdened communities. In fact, on September 6th, Ethereum did just that – it launched The Merge to switch to the less energy-intensive PoS process.

During the recent Senate hearing on Sept. 15 to review the recently proposed Digital Commodities Consumer Protection Act, several panelists acknowledged the carbon footprint of crypto-asset markets. These findings are further elaborated in a Sept. 16 White House release proposing a comprehensive framework for the responsible development of digital assets in the United States

The content of this article is intended to provide a general guide to the topic. In relation to your specific circumstances, you should seek advice from a specialist.

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