Top Swedish officials are calling for a European Union-wide ban on energy-intensive cryptocurrency mining so that the bloc can meet its climate targets.
The call came in a letter published last week signed by the directors of Sweden’s Financial Supervisory Authority and Environmental Protection Agency, which promotes “stability and efficiency” in the country’s financial system. In it, the two directors argue that “the social benefit of crypto-assets is questionable” and is, in any case, outweighed by its “enormous” energy consumption and carbon footprint. They specifically point to so-called “proof of work” verification protocols used by major cryptocurrency networks, in which users are required to solve increasingly complex—and therefore, they say, increasingly energy intensive—computational problems.
“The University of Cambridge and Digiconomist estimate that the two largest crypto-assets, Bitcoin and Ethereum, together use around twice as much electricity in one year as the whole of Sweden,” the letter said. “We therefore call for the EU to consider an EU-level ban on the energy-intensive mining method proof of work.”
The complex nature of the computational problems require high-performance computers. Large cryptocurrency operations can use hundreds or even thousands of such computers, which often require some form of cooling system to prevent overheating.
Bitcoin mining alone could consume more energy than Italy by 2024. If you break down the energy used to validate a block of transactions, then in terms of efficiency, one bitcoin transaction can require as much power as an entire household does in a week. The letter claims that in between April and August of this year, electricity consumption for Bitcoin mining in Sweden increased by “several hundred” percent and is now equal to the electricity consumption of 200,000 Swedish households.
As the carbon footprint of cryptocurrency mining continues to come under scrutiny, some operations have decided to “go green” by using renewable energy, rather than fossil fuels. The Swedish officials, however, see this as a problem that will make it even more difficult for both Sweden and the EU to hit its Paris Agreement climate targets.
“Sweden needs the renewable energy targeted by crypto-asset producers for the climate transition of our essential services, and increased use by miners threatens our ability to meet the Paris Agreement,” the letter said.
Many in the cryptocurrency mining industry tout the sector's ability to promote renewable electricity, chiefly by becoming a customer. However, even if that was the case, Swedish officials argue that renewable energy would be better used to transition existing industries off of fossil fuels.
“Due to the increased focus on CO2 emissions and in light of China's recent Bitcoin prohibition, a greater number of crypto-producers are exploring the possibility of using renewable energy for mining,” the letter said. “Crypto-producers are therefore turning their attention to the Nordic region, where prices are low, taxes for mining-related activities are favourable, and there is good access to renewable energy.”
“If we were to allow extensive mining of crypto-assets in Sweden, there is a risk that the renewable energy available to us will be insufficient to cover the required climate transition that we need to make,” it continues.
Besides an EU-wide ban on proof of work cryptocurrency mining, the officials also call for national measures to stop new energy-intensive crypto operations and rules that would prevent companies that invest in them from “marketing their activities as sustainable.” The letter comes as European Union officials mull bloc-wide financial regulations for cryptocurrency.
When reached for comment, the Swedish Financial Supervisory Authority directed Motherboard back to the letter. The Swedish Environmental Agency did not respond to a request for comment.