Directors from the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency are calling for an EU-wide ban on ‘proof of work’ cryptocurrency mining, for Sweden to halt establishment of new crypto-mining operations and for companies trading and investing in crypto assets to be prohibited from describing their business activities as environmentally sustainable. The ‘proof of work’ system used by currencies such as Bitcoin and Ethereum require computers to carry out complicated mathematical operations to validate transactions, leading to the consumption of large amounts of energy.
There has been a large increase in crypto mining in the Nordic countries due to crackdowns in China and the presence of cheap and renewable energy in the Nordic region. Potential crackdowns on crypto currency in the region might push it to other countries with more lax regulations, contingent on backing from the financial sector. However, such actions could put a strain on valuable energy resources in developing regions and might also push for greater adoption of the currency without necessary public buy-in. The energy composition of the region would also influence how ‘clean’ crypto mining becomes.
The future of crypto currency and its impact on the energy sector will also be influenced by financial mechanisms. A carbon tax, for instance, could push the crypto currency sector away from the intensive ‘proof of work’ system to one with much lower carbon emissions.