A new green era dawns for crypto with a global mining shift – TechCrunch

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Contributor Seamus Donoghue

Climate change is the issue of our time. From policy makers to the individual, each of us has a responsibility to do our part to ensure that sustainability and green practices are implemented across society.

Indeed, governments around the world, from the United States to China, are increasingly taking a proactive stance on climate change, with COP26, the recent 2021 United Nations Climate Change Conference, serving as the drive towards the objectives of the Paris Agreement in terms of climate inspiration. action.

Companies are also taking on more responsibility, with many investors no longer seeing financial performance on its own as a sufficient measure of success – ESG measures, i.e. negative externalities, are increasingly taken into account to determine the true value of the business activity to society.

In this context, the process of revitalizing our financial infrastructure is increasingly in the spotlight. How well do Bitcoin and other digital assets meet ESG criteria? This question has become increasingly important as the adoption of crypto reaches a wider audience. Several Bitcoin futures ETFs have now been approved and are trading in the United States, while institutional adoption is reaching new heights as well, with many of the world’s largest financial institutions, including Standard Chartered, State Street and Citibank, which discreetly strengthen their capacities in space.

Growing regulatory clarity is also enabling a wider range of participants globally to accelerate their strategies for digital assets. The EU’s Comprehensive Crypto-Assets Market (MiCA) framework continues to advance through the legislative process in the European Parliament. In the United States, Gary Gensler’s Securities and Exchange Commission has also signaled plans to clarify a framework for stablecoins and decentralized finance (DeFi).

For digital assets to truly cement their place in the general public and in investor portfolios around the world, they must be subject to the same rigorous ESG standards that every government and business should now meet. Significantly, the industry has gradually accepted this need and accelerated a process of environmental self-regulation in response to the increasing adoption.

Organizations like the Bitcoin Mining Council are working to increase transparency in the industry through higher reporting standards. Many crypto-native organizations are also joining the Crypto Climate Accord, pledging to achieve net zero emissions from electricity consumption associated with crypto-related operations by 2030.

Yet for all this activity, perhaps the greatest contribution to the energy efficiency of digital assets has been a decision entirely outside the control of the industry. In May, the Chinese State Council banned the mining and trading of cryptocurrency. Previously the global stronghold of crypto mining activity, with 44% of the global share of Bitcoin’s mining hashrate, the move has caused an exodus of miners to other jurisdictions.

This move was important for the energy efficiency of the Bitcoin mining industry, shifting from coal-intensive power generation in the Chinese economy to more renewable forms of energy in other jurisdictions.

North America was the big beneficiary of the move, with the US share of mining hashrate falling from 17% in April to 35% in August. With the addition of a 9.5% mining hashrate in Canada, North America now dominates the global mining hashrate with nearly 50% of the global supply.

While energy production in the United States is diversified by state, the change has been a significant boon to the sustainability of Bitcoin mining. The United States is rich in renewable energy sources; add to the mix the fact that large mining companies are essentially competing in a low-margin industry, where the main variable cost is energy, and the incentive is to migrate to the cheapest sources of energy – which are largely renewable.

For example, New York – one of the states with the largest share of Bitcoin hashrate, according to data from Foundry USA – gets a third of its state power production from renewable sources. Texas, another important state for the Bitcoin mining hashrate, is rapidly increasing its share of renewable energy production, with 20% of its electricity coming from wind in 2019.

In addition, the Bitcoin mining industry has a unique feature set that actually incentivizes the use of trapped renewable energy sources that are not yet connected to the national grid. By acting as a means to monetize the production of renewable energy, mining can thus further accelerate the construction of renewable energy capacity.

This shift towards renewable energy sources has already begun to demonstrate to critics that Bitcoin and the broader digital asset industry can be successful with a philosophy of sustainability. Such a transition will not be instantaneous, and it will take time for large mining operations to recover in new jurisdictions. However, this transition is well underway.

Ultimately, it is up to digital asset service providers to demonstrate that the value crypto provides is worth its energy consumption. Significant progress has been made this year alone in reducing the carbon footprint of digital assets, and as crypto continues on its journey of sustainability, adoption by businesses and institutions will follow.

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