Executive orders, SEC interventions and endless debates have put decentralised finance at the heart of American fiscal policy. The latest report by ‘The White House Office of Science and Technology Policy’ raises a terrifying prospect: banning Bitcoin altogether.
The U.S is troubled by crypto’s energy consumption
Limit or eliminate
The exact wording recommends that the U.S seek to “limit or eliminate” Bitcoin because of its environmental impact. A stark line will soon be drawn across the crypto space with a newly upgraded Ethereum on one, clean side, and more energy-intensive proof of work currencies on the other. It’s this environmental impact that troubles the U.S:
"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 argues that the U.S government has a “responsibility” to ensure a greener future and protect the stability of the national grid. There’s no denying that Bitcoin’s carbon footprint is vast. It uses around 150 terawatt-hours of electricity every year, which is more than the whole of Argentina and equivalent to countries including Sweden and Malaysia. Bitcoin mining accounts for 0.55% of all energy usage annually.
Bitcoin’s uncertain future
The report is the first response to an executive order issued by Joe Biden earlier this year, which instructed institutions to perform further research into cryptocurrency. Although the headline grabs sound dramatic, there’s no suggestion that the U.S will leap straight to the “ban” option for all crypto. Instead, the report advocates a more moderate approach based on regulation. The Environmental Protection Agency, the Department of Energy and “other federal organisations” will work with crypto institutions to reduce their energy usage.
Such an approach would include (amongst other things) low energy standards, environmentally responsible crypto assets and a general movement towards a “carbon-free generation.” Both the DOE and EPA would assist in those processes. These would be industry-wide practices applied to all crypto assets, but where it leaves Bitcoin remains unclear. The report specifically lists “high energy intensity consensus mechanisms for crypto-asset mining” as something which should either be heavily limited or stopped altogether.
Some have suggested that a ban would be unenforceable.
It also suggests that federal agencies will have more power to collect data and monitor the energy outputs associated with crypto mining. According to these recommendations, federal authorities will eventually be given enormous scope to regulate not only mining but the crypto industry more broadly. Tellingly, the report makes specific mention of the Ethereum Merge as a “prominent reaction” to calls for a less energy-intensive system.
The Merge has put Bitcoin’s energy usage at the forefront of many people’s minds. With the U.S seemingly planning a large-scale overhaul of the sector, the world’s biggest cryptocurrency might soon face dark days and previously unthinkable consequences.
Sources
https://www.whitehouse.gov/wp-content/uploads/2022/09/09-2022-Crypto-Assets-and-Climate-Report.pdf
https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume
