Swedish Regulators demand a ban on crypto mining

Due to the huge rise in consumption of energy, Swedish authorities are looking up to the European Union to ban the high energy-consuming crypto mining.

In a statement published on 5th November, the regulators said – “Crypto-assets are a threat to the climate transition – energy-intensive mining should be banned.”

The prices of electricity in Sweden are quite cheap due to the efforts made into renewable energy. Unfortunately, through this, the country is attracting crypto mining operations. Moreover, this is expected to increase now. The increase is as the Chinese government has declared cryptocurrencies as illegal. Due to this, many miners would be now in search of a new location to continue their operations.

Swedish Authorities on crypto mining

The director of the Swedish Financial Supervisory Authority, Erik Thedéen along with the director of Swedish Environmental Protection Agency, Björn Risinger, said that the hiked usage of energy due to the activities related to crypto mining can act as a threat to Sweden’s potential to meet its responsibility under the Paris Climate Change.

In the middle of April and August of this year, the consumption of energy due to bitcoin and crypto mining-related activities in the Nordic country rose “several hundred percent”. Now it approximately consumes the equivalent energy of 200,000 households, Thedéen and Risinger said.

In an open letter, the directors of Sweden’s top financial and environmental regulators insisted on a ban on EU-wide ‘proof of work’ crypto mining. Also, all the companies dealing in operations that are related to crypto mining or trading or investing in crypto assets will be banned from describing their business activities as environmentally sustainable.

What do we actually mean by “Proof of Work”?

The first and foremost issue driving the regulatory authorities of Swedish is the “Proof of Work” systems that are being used for mining many cryptocurrencies that also include the world’s two of the largest tokens – Bitcoin and Ether.

Proof of Work system

Under the Proof of Work system, the computer is supposed to solve the mathematical puzzles in order to validate transactions that are occurring on a particular network.

Basically, this process is designed to become more and more difficult. The difficulty level increases as the number of blocks of validated transactions in the chain increase. This results in more computing power leading to higher consumption of energy.

This thing leads to a race between miners who are competing to be the first ones to validate a new block. After validating the block, looking forward to claiming the reward of a new crypto coin. This all depends on the power of your hardware. The more powerful the hardware, the more you are expected to get the coin as a reward.

Issue with crypto mining

In recent times, the Nordic countries have spotted a rise in activities related to crypto mining. This is because the producers are attracted by the cheap rates of energy.

These growing activities related to crypto mining bring with them an opportunity cost as well, Thedéen and Risinger said. This is mainly as Sweden’s renewable energy has distracted away from industrial, transport, and domestic issues, and into bitcoin and other related coins.

They also said it is currently possible to drive a mid-size electric car 1.8 million Km using the same amount of energy that is used to mine just one single bitcoin.

This is equivalent to 44 laps around the globe. Approximately 900 bitcoins are mined on a daily basis. This may not be the best possible use of our renewable energy.

Other leaders on crypto mining

Cathie Wood, chief of Ark Invest also commented on the issue. She said – “Bitcoin will probably become part of the utility ecosystems, and will proliferate renewables faster than would otherwise be the case.”

In April, Jack Dorsey, the CEO of Square tweeted “Bitcoin incentivizes green energy.” “True,” responded Elon Musk.

In July, Elon Musk indicated the confidence that crypto was in the trend and growing rapidly towards renewable energy which will make it “likely” that production would soon reach 50%. After which Tesla would resume accepting bitcoin as payment.

Also, Cathie Wood, chief of Ark Invest said that “Bitcoin will probably become part of the utility ecosystems, and will proliferate renewables faster than would otherwise be the case.”

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