Climate change affects society and therefore our economy, which can create risks in the financial system. To this end, the Riksbank monitors the climate risks in its policy work. Last year’s Payments Report examined the energy consumption of different payment methods and found, among other things, that card payments require less energy than cash.
Cryptocurrencies require a lot of energy
Many cryptocurrencies require a lot of energy. For example, Bitcoin emits around 70 million tonnes of carbon dioxide annually. That is considerably more than Sweden’s total emissions in a year, which are usually around 50 million tonnes. Moreover, Bitcoin mining relies on a technology that increases emissions as the value of the asset rises. The more the value of Bitcoin increases, the more energy is required to mine it.
A new report from the IMF analyses the energy consumption of different technologies for cryptocurrencies and central bank digital currencies. The report shows that the underlying technology plays a major role in energy consumption. According to the authors, central bank digital currencies, and even some cryptocurrencies, can be more energy efficient than many traditional payment methods, such as debit cards.
Many want to regulate cryptocurrencies
In June, the EU established a regulatory framework for cryptocurrencies. Among other things, the framework requires operators to provide information on their environmental and climate footprint. Within two years, the EU will review the environmental impact of cryptocurrencies and propose mandatory minimum standards. In Sweden, both Finansinspektionen and the Swedish Environmental Protection Agency have argued for a ban on certain particularly energy-intensive technologies used to mine cryptocurrencies.