Talking to the crypto crowd in June about the market’s 70% collapse, Euromoney is sad to hear tales of bitcoin miners unable to pay their soaring electricity bills and throwing dust sheets over their darkened rigs.
Those application-specific integrated circuits eat a lot of power.
High energy prices are crushing miners’ margins. Many have had to abandon the old notion of holding on for dear life to the bitcoins they have earned by verifying transactions and blocks.
Some miners have been selling bitcoins to meet their utility bills, adding to the decline in value in June from $30,000 to $19,000, coming from an all-time high of $68,000 in November. Others that had leveraged up also began cashing out to reduce their debts, fearing even steeper falls and ignoring those touting a possible recovery later this year to $75,000.
Green credentials?
But what’s this? A contact sends Euromoney a June paper from the IMF saying that “some kinds of crypto assets can be more energy efficient than much of the current payment landscape, including credit and debit cards”.
This sounds like a study straight from the bitcoin mining council’s press office. As the crypto industry spends heavily on US politicians to back adoption, and even inclusion in individuals’ 401K retirement investment plans, its adherents have taken to arguing that miners are using more electricity generated from renewable sources.
It is therefore unfair to criticize crypto as a polluter. Rather, it should be praised for its green credentials.
Has the IMF, which previously warned over the risks to financial system stability from a crypto market that boomed in the era of negative rates but stumbled as soon as central banks decided they had better do something about inflation, been won over?
Perhaps not.
Closer reading suggests that the IMF hasn’t turned bitcoin advocate. “The research shows that proof-of-work crypto uses vastly more energy than credit cards,” it says.
How convenient that central bank digital currency should not only make payments more efficient but also help save the planet
Rather, it is offering support to those central banks now working on their own versions of digital currency.
The IMF says: “Replacing proof-of-work with other consensus mechanisms is a first green leap for crypto, and using permissioned systems is a second. Together, these advances put crypto’s energy consumption well below that of credit cards.”
How convenient that central bank digital currency should not only make payments more efficient but also help save the planet.
Unfortunately, even though Ethereum is moving to proof-of-stake, this is irrelevant for crypto. “Nobody uses them to pay for anything,” says the founder of one blockchain-based payments fintech. “It’s a speculative asset class, for which the huge costs of borrowing in stablecoins only make sense when the market is going straight up.”
Somebody needs to tell the IMF.
