Bitcoin ETFs Seek To Shed Their ‘Energy Hog’ Image With Carbon Offsets

[ad_1]

Purpose Investments to Launch New ‘Carbon Neutral’ Classes of Bitcoin and ETFs Next Week

With Canadians increasingly spoiled for choice when it comes to crypto-focused exchange-traded funds (ETFs), more asset managers are funneling fees into carbon offsets to help allay concerns about energy-intensive digital currencies.

Purpose Investments is set to launch new “carbon neutral” classes of its bitcoin and ether ETFs next week. The Toronto-based company with more than $ 12 billion in assets said the new securities are expected to begin trading on the Toronto Stock Exchange on November 9, under the ticker symbols (BTCC.J) and (ETHH.J), respectively. .

In August, Calgary-based Accelerate Financial Technologies announced a carbon-negative ETF that uses up to 10 percent of the fund’s 69 basis points of management fees to plant trees. In May, Toronto-based Ninepoint Partners announced that it would partner with software company CarbonX to purchase carbon credits for its bitcoin ETF using an undisclosed portion of the management fee. (BITC.TO)

The new, greener investment options come as crypto-asset firms challenge claims of excessive energy consumption. The debate intensifies as world leaders gather in Glasgow for the 2021 United Nations Climate Change Conference.

A report released on Monday, backed by Coinbase and other crypto companies, warns policymakers not to “throw the digital baby in the climate bathwater,” touting the value of digital ledger technology for facilitate sustainable and inclusive finance. Its authors call for more transparent sustainability data and an industry partnership with “established leaders in carbon accounting and reporting.”

The price of bitcoin (BTC-USD) hit a new all-time high last month amid excitement over the first US Bitcoin Futures ETF (BITO) that began trading on the New York Stock Exchange. Rising prices are a further incentive for mining, a process that requires increasingly powerful computers to solve increasingly difficult mathematical problems.

Cryptocurrency mining activity has increased in North America since the Chinese government’s crackdown on cryptocurrencies earlier this year. In New York, lawmakers are considering a bill to ban the use of fossil fuels to mine bitcoin.

The story continues

Bank of America analysts recently put bitcoin’s global energy consumption on par with American Airlines (AAL), which carries more than 200 million passengers in a typical year. However, the pro-crypto report released Monday by Global Digital Finance targets such comparisons.

“While important for putting things in perspective, they can only provide partial information at best,” wrote two authors from the Cambridge Center for Alternative Finance.

“Electricity consumption is related to bulk generation, rather than transaction processing. Therefore, this comparison tends to be primarily theoretical and of little practical relevance without additional context.”

Purpose has revealed plans for a suite of new crypto-focused funds since the February launch of North America’s first ETF designed to track the price of bitcoin.

Vlad Tasevski, COO and product manager, says the cryptocurrency held in his company’s new carbon-conscious funds is “fully carbon offset.”

The company claims to be in partnership with Patch Technologies, a San Francisco-based startup that helps companies measure their carbon footprint and fund offset projects. These can include forest restoration or direct carbon capture technology. Purpose says it plans to buy offsets at the start of each trading week.

“We believe this is a leading way to offset all of the emissions associated with holding bitcoin and ether,” Tasevski told Yahoo Finance Canada in a telephone interview. “The fees on these classes will be higher. This increased cost will be used to purchase carbon credits.”

The Purpose Bitcoin ETF (BTCC.TO) and the Purpose Ether ETF (ETHH.TO) have a management fee of 1% and a management expense ratio capped at 1.5%. Purpose says the additional cost of carbon-friendly offerings will be reflected in the new class’s management expense ratio.

Not everyone is sold. A leading Canadian investor in clean technology calls the use of carbon offsets a waste of scarce resources needed to offset critical, high-emission industries.

Tom Rand, managing partner at venture capital firm ArcTern Ventures, has been a vocal critic of crypto issues and of those who would buy offsets to improve the environmental, social and governance (ESG) attractiveness of related investments.

“It seems a waste to use rare, quality carbon offsets on things like bitcoin, rather than useful industrial activities like aviation, steel or cement. Bitcoin is optional, cement, l ‘steel and theft are not,’ he told Yahoo Finance Canada.

“It will always be a big consumer of energy. You are trading kilowatt-hours for bits of bitcoin, and the number of kilowatt-hours per bitcoin will always increase, as you have to make it harder and harder to mine the next bitcoin.”

Last month, Bank of America Global Research found that offsets issued in 2020 represented 0.4% of total global emissions. Bank analysts described the market as still “relatively small”. They predict that it will need to grow up to 50 times for many companies to reach net zero by their commitments in 2050.

While Rand would prefer the limited supply of high quality offsets available today to move towards “real economic activity”, he concedes that it is “always good to seed the offsets market. [with investment]. “

Tasevski sees more action on shows coming from the crypto community. The problem led to the creation of the Crypto Climate Accord (CCA) in April, a voluntary framework that requires cryptocurrency companies to reduce net carbon emissions from electricity to zero by 2030.

“The carbon impact going forward will be one of the main default costs of owning bitcoin. There is a lot of work to be done to make the mining process more efficient,” he said. declared. “The CCA has already engaged a wide range of leading players in the crypto industry. We expect it to continue to push the needle forward in this space, especially as the market attracts more attention to the climate crisis. “

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

Download the Yahoo Finance app, available for Apple and Android.

[ad_2]