The EU wants to conduct research into how great the ecological damage caused by Bitcoin mining is – and how it can be mitigated. Some already see this as an attack. But it doesn’t have to be that way.
As BTC-Echo recently reported, the EU is launching a “new attack on Bitcoin”. This is about a call for tenders for a research project that could have “immense implications”, namely the over-regulation of Bitcoin and Bitcoin mining in the EU.
The call for tenders is from the Directorate General for Financial Stability, Financial Services and the Combined Capital Markets of the EU Commission. It is entitled “Development of a methodology and a sustainable standard to mitigate the ecological consequences of crypto assets.” The tender is worth 800,000 euros.
According to the brief text, there is “evidence that crypto assets can cause significant damage to the environment and the climate as well as negative economic and social externalities, depending on the consensus mechanism through which transactions are validated.” Since, according to the EU, there is one There is an “increasing need for crypto assets” and an “expansion of crypto mining” – also in the EU! – this could undermine the EU’s climate goals. Therefore, the EU’s ability to “assess and mitigate the consequences of crypto mining and develop specific sustainability standards” should be improved – also against the background of future crypto regulation.
BTC Echo editor-in-chief Sven Wagenknecht complains that, according to the tender, the EU already knows that certain cryptocurrencies are harmful to the environment. Specifically, this apparently means Bitcoin, the only relevant proof-of-work coin in terms of capital. The research should above all provide new food for the “anti-Bitcoin camp” in the EU. Accordingly, Wagenknecht expects that the tender will not be awarded to open-ended projects, but rather to institutes “that take a critical stance towards Bitcoin”, meaning that it is more of a commissioned work.
Personally, I’m not sure whether BTC-Echo is overstepping the mark here. It is not in itself objectionable that the EU calls for a study on the ecological footprint of Bitcoin, and I think you are reading too much into the introductory line if you derive a commissioned work from it. There is, of course, evidence that Bitcoin mining has negative environmental consequences. You have to have very tight blinders to ignore this fact.
It is also clear that Bitcoin mining is under increased pressure to legitimize itself in times of accelerating climate change and an (alleged, perceived, politically instrumentalized) electricity shortage. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin produces slightly more greenhouse gases than Hungary, which, even if the actual values are lower, is not a small number and undoubtedly causes ecological damage. This does not include secondary costs, such as fans, full nodes and production and disposal of mining hardware.
The fact that the EU is commissioning a study that precisely measures the problem is unnecessary – there are already three competent analysts in Cambridge, the Digiconomist and Batcoinz – but in itself quite useful. The question, of course, is how fair this study will be. Will it reinvent what has already been done for years, namely the measurement of electricity consumption and CO2 emissions from mining? Or will it go further and take into account that the coming halvenings will reduce electricity consumption even before EU regulation can have any influence? Will it recognize that Bitcoin mining is a comparably clean industry per euro of value added? Will it compare Bitcoin investments with investments in, say, oil companies and car manufacturers? Will it think about ways in which Bitcoin mining can advance the energy transition, stabilize green energy networks and reduce landfill gas? Will it place Bitcoin in the context of other industries, such as livestock and tourism, that cause much greater damage?
The crucial question, however, will be what follows from the study. Sven Wagenknecht fears that the EU will, for example, “ban Bitcoin mining, impose an environmental tax on BTC transactions or impose regulations on companies such as stock exchanges [kann]“To only offer Bitcoin from green production for trading or to use it for services.” However, experience shows that this does not really depend on a study.
The EU commissioners who are against Bitcoin don’t need a study to complain about Bitcoin’s energy consumption. In China, the government also commissioned a study on mining, which wasn’t all that negative and brought some interesting regulatory approaches into play, only to soon ban mining completely despite everything because it allegedly endangers China’s climate goals. The result was that mining (briefly) disappeared from China, but instead settled in Kazakhstan, Russia and the USA, where it was often powered by coal power instead of hydroelectric power as before. While China may have made it easier for itself to meet its climate goals under the Paris Agreement, global climate damage from mining has actually increased.
One can hope that the EU does not follow this nationalistic path of “Paris at any price”. If climate was really a concern, an objective study should urge the EU to attract Bitcoin miners to wind farms, photovoltaic farms and hydroelectric power plants in the EU at all costs. A mix of ecological regulation and subsidies for strategic green mining should be the ideal solution.
Bitcoiners, on the other hand, should complain less that the EU is concerned about ecological damage and should instead take more action themselves to reduce the ecological footprint of mining. Because the longer the decarbonization of mining stagnates at a low level – or even declines – the more Bitcoin’s Proof of Work will have a legitimacy problem.