Nico Bers
// Environmental consequences could inspire new regulation of cryptocurrencies //
On September 24, 2021, China completely banned all cryptocurrency-related transactions and activities, sending Bitcoin’s share price tumbling by $2,000. Although China banned cryptocurrency (crypto) trading in May 2019, some foreign transactions have continued since then. The Chinese government cracked down on crypto harshly this year when it instructed banks to decline crypto-related transactions and decided to ban mining – the process of using computers to make money by validating cryptocurrency transactions – as well. China has now, however, declared that anyone involved with the cryptocurrency industry will be prosecuted. In spite of the wealth it produces, the process of crypto mining is taxing in terms of power consumption and environmental resources. Whilst China was not necessarily concerned with climate change in making this decision, it may be time for a break from crypto due to the environmental damage this form of digital currency is causing.
Cryptocurrency mining increases the carbon footprint we leave behind, therefore worsening the effects of climate change. One unintended consequence of China’s crypto ban may be a reduced carbon footprint. The carbon emissions of Bitcoin are similar to those of the entire country of Romania: a total of over 80 metric tons of carbon dioxide. One Bitcoin transaction uses as much energy as the average American household uses in more than 63 days. Because of this toll on the environment, officials and investors must put serious thought into the continuation of cryptocurrency trading and mining as well as the positive impacts of China’s ban.
In spite of cryptocurrency’s detrimental effects on the Earth, crypto-enthusiasts should consider the economic consequences that would come with banning the use of these digital currencies. Over 300 million people have either traded in or own crypto around the world, and its market is currently worth more than $2.2 trillion. Since so many people have a stake in crypto, terminating its validity and legality in trade would prevent these people from exchanging the crypto for other forms of currency. Crypto-buyers would face economic harm, as the money that they have invested in crypto would become worthless. In order to minimize an economic collapse, the environmental damages must be compared with the benefits to see if an environmental boost is worth the economic disaster ensuant with such a radical change.
Although China did not ban cryptocurrency for environmental reasons, it is a necessary step in the fight against climate change. Yet, because of the prosecution of those with ties to crypto as discussed above, China infringes on the rights of its citizens to decide where they invest their money. As China’s ban on cryptocurrency may be too harsh, a new plan should be devised in other countries until crypto can change to be more eco-friendly. If certain currencies do not meet specific qualifications, they should be taxed and restricted. This sort of plan would not create as catastrophic an economic impact as an outright ban while still helping the environment.
A chart of the value of Bitcoin recently– note the sharp drop on Sep 24, 2021. (https://www.coindesk.com/price/bitcoin/)