The cryptocurrency boom found a threat to global energy

The cryptocurrency boom found a threat to global energy

 

A surge in unregulated cryptocurrency mining could pose a threat to the energy sector and divert resources from the electrification of other sectors of the economy, especially in emerging markets, analysts at Fitch said.

The global boom of cryptocurrencies in 2021, together with the development of mining, has led to the emergence of ecosystems that already account for 0.4 to 1 percent of electricity consumption globally. Bitcoin mining alone, which accounts for about 40 percent of all crypto assets, is 125 terawatt-hours at the annual level, which is comparable to the energy consumption of entire states, such as Norway or Sweden.

Now miners prefer to choose regions with low electricity costs, especially those countries where it is subsidized by the state since electricity accounts for up to 90 percent of their costs. Moreover, representatives of the sector can easily change their place of work, which was shown by the massive “exodus” from China to Russia, Canada, and the United States, associated with tough measures from Beijing.

The risks for the energy sector, according to analysts, can be limited under the condition of more serious regulation. Now states are already striving to assess the possible risks associated with cryptocurrencies, including paying attention to the threats to financial stability and the possible use of such assets for illegal operations. Thus, the crypto sector may turn out to be more predictable in the long term, and mining issues may be regulated by law.

Some countries even consider it possible to ban cryptocurrencies. Such proposals are being discussed, including in Russia, where the Central Bank is a tough opponent of cryptocurrencies. However, the Ministry of Finance considers the way of regulation acceptable. On February 21, it became known that the department sent to the government a draft federal law “On Digital Currency”, which establishes the norms of the concept of regulation of the crypto market in Russia. Cryptocurrencies in the document are considered as a tool for investment, moreover, several restrictions are provided.