Erik Tedeen, the head of the Swedish Financial Conduct Authority, and Bjorn Reisinger, the head of the Environmental Protection Agency, released a statement calling for a ban on mining cryptocurrency with the Proof-of-Work (PoW) algorithm in the European Union.

As of now, up to 120 million tons of carbon dioxide are released into the atmosphere from the extraction of digital assets each year, according to officials.

This could prevent the country and the EU from complying with the Paris climate agreement, as per Tedeen and Reisinger.

To confirm transactions and create new blocks, the Proof-of-Work (PoW) method is used. Miners compete with each other using PoW to confirm transactions on the network in exchange for a reward. PoW is currently used by Bitcoin, Ethereum, Litecoin, Dogecoin, Monero, and other cryptocurrencies.

According to the University of Cambridge and Digiconomist, the two most popular cryptocurrencies, Bitcoin and Ethereum, use nearly twice as much electricity in a year as the entire Swedish country. This is due to the fact that the crypto mining process necessitates proof of work. The electricity demand is increasing as the number of competing crypto miners grows.

In an article, officials stated: “If we were to allow extensive mining of crypto-assets in Sweden, there is a risk that the renewable energy available to us will be insufficient to cover the required climate transition that we need to make.”

The transition of Sweden's critical services to a low-carbon future requires the renewable energy sought by crypto-asset producers in order to achieve the Paris Agreement.

Crypto-asset mining, which authorities say consumes a lot of energy, should therefore be banned. They further assert that a global move towards more energy-efficient crypto mining, the EU's ban on proof of work mining, might serve as an important first step.

Pavan A

CBW - External Analyst

INDIA