Biden executive order on cryptocurrencies – what to know
“Should these measures prove ineffective at reducing impacts, the [Biden] administration should explore executive actions, and Congress might consider legislation, to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset mining”
BitcoinBTC +0.1%, using the energy-intensive proof-of-work consensus mechanism, could be banned in the U.S. under a proposal made by the White House Office of Science and Technology.
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Following an executive order made by U.S. president Joe Biden in March in the aftermath of an extraordinary 2021 bitcoin price surge, the Office of Science and Technology said the government “has a responsibility” to “protect” people from pollution caused by cryptocurrencies.
The proposal comes amid a crypto market shake-up caused by ethereum, the second-largest cryptocurrency after bitcoin, beginning its long-await transition from proof-of-work to the far more energy-efficient proof-of-stake—something some think could trigger a massive bitcoin price crash.
“Electricity usage from digital assets is contributing to [greenhouse gas emissions], additional pollution, noise, and other local impacts, depending on markets, policies, and local electricity sources,” the report reads, adding: “The U.S. government has a responsibility to ensure electric grid stability, enable a clean energy future, and protect communities from pollution and climate change impacts.”
The climate impact of bitcoin mining has become a hot topic in recent months as the soaring bitcoin price pushed up bitcoin’s energy demands and fears over climate change reached fever pitch.
The bitcoin price rocketed higher at the end of 2020 and into 2021 only to crash back this year—though it remains around twice its mid-2020 level.
The bitcoin network is thought to use roughly as much energy each year as some smaller countries, with the Cambridge Center for Alternative Finance recently calculating it consumes around 110 terawatt hours per year, or 0.55% of global electricity production, equivalent to the annual energy demands of the likes of Malaysia and Sweden.
The Office of Science and Technology recommends creating so-called clean energy “performance standards” for bitcoin and cryptocurrency mining—which involves using powerful computers to both secure the blockchain network and create new coins—including encouraging the “use of environmentally responsible crypto-asset technologies.”
“Should these measures prove ineffective at reducing impacts, the [Biden] administration should explore executive actions, and Congress might consider legislation, to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset mining”—referring to bitcoin’s proof-of-work.
Earlier this year, internal European Union documents revealed Swedish financial regulators and the EU’s European Commission discussed the possibility of banning bitcoin’s proof-of-work mining mechanism due to its environmental impact.
Meanwhile, ethereum, which still currently uses the proof-of-work system pioneered by bitcoin, has begun a long-awaited switch to proof-of-stake, removing its reliance on miners while reducing the ethereum network’s carbon footprint by 99%.
Ethereum is expected to complete its transition to proof-of-work around mid-September.
Billy Bambrough – Senior Contributor to Forbes.com
September 8, 2022
