Amid all the excitement around the Bitcoin halving, why is no one considering the environment?
INSTITUTIONAL interest in digital assets has been surging this year. And, as we approach the Bitcoin halving event, it’s becoming a frenzy.
The halving is seen as a somewhat pivotal event in the cryptocurrency ecosystem, occurring approximately every four years. Simply put, it involves significantly reducing the rewards that miners receive for validating transactions on the Bitcoin network.
It’s a deliberate mechanism that aims to control the rate at which new Bitcoin enters circulation, thus maintaining the cryptocurrency’s deflationary nature.
And it’s very hard to predict the exact impact of the upcoming halving on Bitcoin’s electricity consumption.
All else being equal, the halving reduces miners’ income, making it less attractive to invest in more energy efficient technologies. But if Bitcoin’s price then subsequently doubles, the block reward measured in dollars remains the same, and so the more responsibly minded miners may - or should - decide it's the right time to shift to a greener approach to future proof their operations.
Either way, the issue of sustainability has been brought sharply into focus by the new wave of spot Bitcoin ETFs, which are putting a huge demand on what miners can produce. According to our research with the Crypto Carbon Ratings Institute (CCRI), as of March 2024 the annualised carbon footprint of all physically backed Bitcoin fund products stood at 4487.93 kilotonnes of carbon dioxide (ktCO2).
To put this into a more relatable context, this is equivalent to a person flying from London to New York and back over 1.5 million times!
And this is now set to increase sharply with the likes of the London Stock Exchange (LSE) and the Hong Kong Securities and Futures Commission (SFC) now announcing their clear intention to accept crypto fund products moving forward.
As crypto moves mainstream, everyone involved in the growing ecosystem – whether miners or the financial institutions offering new digital asset propositions – should start thinking more carefully about how they can harness the latest technology to embed sustainability at the heart of their propositions.
This sits firmly in line with evolving investor sentiment as well as new regulations, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), which requires companies to report on Scope 3 emissions. So it can’t be simply ignored.
This is why we are now putting a lot of emphasis on helping asset managers and other financial institutions to combat their carbon footprint.
Last year, we launched Oxygen, the first of its kind – a full solution that uses blockchain technology and strategically-sourced market instruments, including renewable energy certificates (RECs), to enable financial institutions to measure, mitigate, and report on the carbon footprint of their digital asset activities.
We also helped Jacobi Asset Management to deliver Europe’s first ESG-aligned Bitcoin spot ETF, listed on Euronext Amsterdam. This should act as a compelling case study of what is possible - if providers are willing.
As providers’ share of crypto holdings increases, so must their responsibility when it comes to ESG considerations.
Blockchain is now emerging as a real ‘digital enabler’ in terms of tackling climate change and supporting the energy transition to a more sustainable infrastructure.
So amidst all the noise around the Bitcoin halving, I’d urge financial providers to start thinking carefully about how they can also harness the technology that underpins the Bitcoin boom to more effectively address the carbon footprint of digital asset activities.
By working together, we can try to ensure that the new wave of financial products has a healthier footprint than the preceding generation, and that the digital asset push is properly aligned with net-zero principles.
Industry collaboration is always crucial to securing better outcomes - and what could be a more important outcome than protecting the planet for future generations?
Nick Jones, Founder and CEO, Zumo
