UN experts warn that cryptocurrencies pose climate-change risks

The UN-backed Intergovernmental Panel on Climate Change (IPCC) identified cryptocurrencies among the risks to the environment.

In the report the report “Mitigation of Climate Change Impacts,” the authors stressed that “without immediate and substantial reductions in carbon emissions across all sectors, limiting global warming to 1.5°C is unattainable.”

They argued that advances in storage, processing and transmission of information could help lower emissions. This would come from improvements in energy-efficiency controls, lower costs of transactions in energy production and transmission, and a reduced need for physical transport of energy.

“Nevertheless, data centres and the energy-intensive IT systems associated with them (including blockchain) will raise demand — cryptocurrencies could be a global source of CO₂ if electricity generation is not decarbonised. There is also concern that information technologies could exacerbate existing disparities,” the authors of the report said.

They noted that digitalisation, automation and artificial intelligence, as general‑purpose technologies, could give rise to a number of new products and applications. These solutions, while potentially efficient in themselves, could increase electricity demand.

“Energy needs for cryptocurrencies are also a growing concern, though there is considerable uncertainty about their use by the assets’ underlying blockchain infrastructure,” the IPCC report states.

In November 2021, the heads of two Swedish regulators said that mining Bitcoin and other cryptocurrencies that operate on the Proof-of-Work algorithm would hinder the EU’s ability to meet its carbon-reduction commitments. They proposed to ban such mining methods.

In January, one of them, Erik Teden, already in his role as deputy chair of ESMA, again called on the EU to ban it. His view was supported by Hungarian Finance Minister György Matolcsy.