ECB: Proof-of-Work Crypto is Not Sustainable, Ban or Tax the Asset
The European Central Bank (ECB) believes that a carbon tax on crypto transactions or an outright ban on proof-of-work crypto mining like Bitcoin (BTC) are needed to fight climate change
A new report issued by the European financial authority outlines that while the European Union is managing its carbon footprint in a multitude of ways, cryptocurrency mining of proof of work blockchains should not be excluded. The study notable compares proof-of-stake to the electric vehicle, while proof-of-work is considered the traditional car running on gasoline.
“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 proof-of-work technology, with country-sized energy consumption footprints and yearly carbon emissions that currently negate most Euro area countries’ past and target greenhouse gas (GHG) savings.
To continue with the car analogy, public authorities have the choice of incentivizing the crypto version of the electric vehicle (proof-of-stake and its various blockchain consensus mechanisms) or to restrict or ban the crypto version of the fossil fuel car (proof-of-work blockchain consensus mechanisms).”
The bank stresses that while authorities could just let it play out, this is highly unlikely and either imposing a carbon tax to crypto transactions and mining or an outright ban on proof-of-work mining, such as Bitcoin, would be recommended:
“So, while a hands-off approach by public authorities is possible, it is highly unlikely, and policy action by authorities (e.g. disclosure requirements, carbon tax on crypto transactions or holdings, or outright bans on mining is probable.”
The report concludes that PoW-assets are not sustainable and should not be included in a company’s ESG strategy:
“Investors will have to evaluate whether investing in certain crypto-assets is in line with their environmental, social and governance (ESG) objectives.
It is highly unlikely that investments in PoW-based assets can be part of an ESG investment strategy. Even so-called green crypto mining would crowd out other, likely more productive uses of renewable energy.
Financial institutions will have to incorporate the climate-related financial risks of crypto-assets into their climate strategy, which should be an integral part of their overall risk strategy.”
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Source: igaming
