Autor Cointelegraph By Richard Mason

Philippines’ digital transformation could make it a new crypto hub

Philippines’ digital transformation could make it a new crypto hub

Uverejnil používateľ | júl 14, 2022 |

Binance, the cryptocurrency exchange, has recently acquired a virtual asset service provider (VASP) license from the Bank of Spain in order to operate in the country. In its ambitious expansion plans that the cryptocurrency exchange is persisting despite the global jump and market slump in the cryptoverse, there is another country that Binance is looking toward — the Philippines.In June, the CEO of Binance, Changpeng Zhao, stated in a press briefing in Manila that the exchange is looking to obtain a VASP license in the Philippines. In addition to the VASP, Binance wants to get an e-money issuer license from the central bank of the country, Bangko Sentral ng Pilipinas (BSP). While the former license would allow the platform to offer trading services for crypto assets and the conversion of these assets to the Philippines, the latter will allow it to issue electronic money.The Philippines is the world’s 36th largest economy in the world by nominal GDP and the third-largest in Asia, according to data from the World Bank. Despite its small size, the country is considered to be one of the fastest-growing economies in the world due to it being newly industrialized, thus marking a distinctive shift from agriculture to services and manufacturing.Philippines gross domestic product in U.S. dollars 1997–2001. Source: Trading EconomicsCryptocurrencies are extremely popular in the Philippines due to the economic shift that the country went through when digital assets began to gain popularity. A recent survey has revealed that the Philippines ranks 10th in cryptocurrency adoption, with over 11.6 million Filipinos owning digital assets.This is also evidenced in the fact that according to data from ActivePlayer.io, 40% of all the players of the popular play-to-earn (P2E) game Axie Infinity were from the Philippines. In fact, the game has also been a financial game-changer for many citizens in the country.Related: How blockchain games create entire economies on top of their gameplay: ReportCointelegraph spoke with Omar Moscosco, co-founder of AAG Ventures — a P2E guild based in the Philippines — about the potential the Philippines holds for the mass adoption of digital assets. He said, “The Philippines is home to a large unbanked and underbanked population with some 66 percent of this total population having no access to traditional banking services or similar financial organizations.”He added that COVID-19 sparked a digital transformation in the country, saying:“The Philippines registered the highest number of first-time users of digital payment methods at 37 percent. The regional average was 15 percent. As such, digital payments made up 20 percent of total financial transactions in the country in 2020, an increase from 14 percent in 2019. Also, in 2020, e-money transactions totaled 2.39 trillion PHP (US$46.5 million), an increase of 61 percent compared to 2019.”Jin Gonzalez, chief architect of Oz Finance — a decentralized finance (DeFi) service provider based in the Philippines — told Cointelegraph about the impact the entry of Binance in the country would entail for the market. He said, “Binance already receives a large amount of Philippine peso volume for its peer-to-peer (PHP/USDT) service. It is also the exchange of choice for Filipinos due to the favorable rates it charges versus local service providers. Getting a BSP license will only legitimize its operation and strengthen its position in the market.”However, global concerns have begun to emerge around the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) frameworks that companies with VASP licenses use. The central bank of Ireland has published a bulletin for VASPs that is aimed at assisting applicant firms to strengthen their VASP registration application and their AML/CFT frameworks accordingly. This development was good for the growing ecosystem, as it addresses concerns that would inevitably arise when considering the integration of digital assets into the existing financial ecosystem and the economy. At the same time, Hong Kong introduced a licensing regime for VASPs in June this year, which imposes statutory AML/CTF requirements for companies that wish to operate in the nation.Central government keen to push use casesThe regulatory landscape of the Philippines is still in a fairly nascent stage as there is no strict restrictive regulation for both businesses and individuals at the moment. In fact, the government of the country, in tandem with its central bank, seems keen to adopt blockchain technology and implement its use cases in various sectors of the economy. Gonzalez said:“At the current moment, BSP regulation is in place, but SEC regulation has yet to pass. Regardless, the Philippines has an open position on digital assets, and its intent to regulate is intended to balance investor protection with promoting the advancement of the technology. PH regulators, especially the Central Bank, maintain a progressive stand on the adoption of digital assets.”Earlier this year, in May, the Philippines government’s Department of Science and Technology started a blockchain training program for researchers in the department. Through the training program, the government is looking to adopt blockchain in areas such as healthcare, financial support, emergency aid, issuance of passports and visas, trademark registration and government records, among others.Cliffs at El Nido in the Philippines. Source: TudernaThe Philippines-based UnionBank has also launched a payments-focused stablecoin pegged to the Philippine peso that aims to drive financial inclusion in the country. It attempts to link the main banks of the country to rural banks and bring financial access to previously unbanked parts of the country. Gonzalez said:For the time being, it seems content to observe how bank-issued stablecoins (such as PHX by UnionBank) will bring forward financial inclusion.However, even with the openness of the government, there are entities keeping a keen eye out for irregularities in the way digital asset companies are operating. The local policy thinktank Infrawatch PH has sent a letter to the Philippines’ Department of Trade and Industry (DTI) asking them to conduct an investigation against Binance for promotions in the country without having a proper permit for the same.The DTI responded to this letter, putting the ban out of the question by stating that it has set no clear guidelines for the promotion of digital assets.CBDC launch could be a gamechanger for the countrySince a majority of the citizens in the Philippines are unbanked and thus operate in a fairly unregulated manner in matters like taxation, the introduction of a central bank digital currency (CBDC) into the economy could be a major step in the digital transformation that the country is currently undergoing.Moscoso said, “CBDCs can take advantage of mobile technologies to provide increased access to financial services to rural households and other segments that are underserved by the current banking system. The central bank expects that at least half of the payments would eventually be made digitally by 2023.”Related: Crypto in the Philippines: Necessity is the mother of adoptionHe added that around 70% of adults would be using a digital account for transactions by this time, which allows consumers to have additional options that can make them steer away from loan sharks.Despite the current bear market, the Philippines still has a forward-thinking perspective about the adoption of digital assets and blockchain-based business models. This outlook puts the country in a good spot, with the potential to become a cryptocurrency hub.

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Bitcoin and banking’s differing energy narratives are a matter of perspective

Bitcoin and banking’s differing energy narratives are a matter of perspective

Uverejnil používateľ | jún 11, 2022 |

The Carbon Bankroll Report was released on May 17 as a collaboration among the Climate Safe Lending Network, The Outdoor Policy Outfit and Bank FWD. The collaboration made it possible to calculate the emissions generated due to a company’s cash and investments, such as cash, cash equivalents and marketable securities. The report revealed that for several large companies, such as Alphabet, Meta, Microsoft and Salesforce, the cash and investments are their largest source of emissions.The energy consumption of the flagship proof-of-work (PoW) blockchain network, Bitcoin, has been a matter of debate in which the network and its participants, especially miners, are criticized for contributing to an ecosystem that might be worsening climate change. However, recent findings have also brought the carbon impact of traditional investments under the radar.Bitcoin is often vilified due to “imagery”The Carbon Bankroll Report was drafted by James Vaccaro, executive director at the Climate Safe Lending Network, and Paul Moinester, executive director and founder of the Outdoor Policy Outfit. Regarding the impact of the report, Jamie Beck Alexander, director of Drawdown Labs, stated:“Until now, the role that corporate banking practices play in fueling the climate crisis has been murky at its best. This landmark report shines a floodlight. The research and findings contained in this report offer companies a new, massively important opportunity to help shift our financial system away from fossil fuels and deforestation toward climate solutions on a global scale. Companies that are serious about their climate pledges will welcome this breakthrough and move urgently toward tapping this lever for systematic change.”A few metrics that the report highlighted regarding the climatic impact of the banking industry include:Since the signing of the Paris Agreement in 2015, 60 of the world’s largest commercial and investment banks have invested $4.6 trillion in the fossil fuel industry.Banks such as Citi, Wells Fargo and Bank of America have invested $1.2 billion in said industry.The largest banks and asset managers in the United States have been responsible for financing the equivalent of 1.968 billion tons of carbon dioxide. If the U.S. financial sector were a country, it would be the fifth-largest emitter in the world, just after Russia.When compared to the direct operational emissions of global financial firms, the emissions generated through investing, lending and underwriting activities are 700 times higher.Cointelegraph spoke with Cameron Collins, an investment analyst at Viridi Funds — a crypto investment fund manager — about the reasons behind the excessive vilification of the Bitcoin network. He said: “It’s easy to picture a warehouse of high-performance computers sucking down power, but it’s not so easy to picture the downstream effects of cash in circulation financing carbon-intensive activities. More often than not, it’s this imagery that demonizes Bitcoin mining. In reality, the entire banking system uses more electricity in operations than that of the Bitcoin mining industry.”In addition to the portrayed “imagery,” there have been various efforts to track the exact energy consumption of operating the Bitcoin network. One of the most widely accepted metrics for this complex variable is calculated by the Cambridge Center for Alternative Finance and is known as the Cambridge Bitcoin Electricity Consumption Index (CBECI).At the time of writing, the index estimates that the annualized consumption of energy by the Bitcoin network is 117.71 terawatt-hours (TWh). The CBECI model uses various parameters such as network hash rate, miner fees, mining difficulty, mining equipment efficiency, electricity cost and power usage effectiveness to compute the annualized consumption for the network.The growth in the number of participants and related activity on the Bitcoin network is evident in the monthly electricity consumption of the network. From January 2017 to May 2022, the monthly electricity consumption has multiplied over 17 times from 0.62 TWh to currently standing at 10.67 TWh. In comparison, companies such as PayPal, Alphabet and Netflix have witnessed their carbon emissions multiplied by 55, 38 and 10 times, respectively.Collins spoke further about the perception of the Bitcoin network that could be changed in the future. He added that if more people approached Bitcoin (BTC) mining as a financial service as opposed to mining, sentiment surrounding PoW networks might begin to change, and the public may appreciate it more as an essential service as opposed to a reckless gold rush. He also highlighted the role of thought leaders in the community in conveying the true nature of Bitcoin mining to policymakers and the public at large.Working together to solve the energy problemRecently, there have been several examples of the Bitcoin mining community collaborating with the energy industry — and vice-versa — to work on methodologies beneficial for both parties. The American Energy company, Crusoe Energy, is repurposing wasted fuel energy to power Bitcoin mining, starting in Oman. The country exports 23% of its total gas production and aims to reduce gas flaring to an absolute zero by 2030.Even the United States energy giant ExxonMobil couldn’t help but get in on the action. In March this year, it was revealed that Crusoe Energy had inked a deal with ExxonMobil to use excess gas from oil wells in North Dakota to run Bitcoin miners. Traditionally, energy companies resort to a process known as gas flaring to get rid of the excess gas from oil wells.Related: Stranded no more? Bitcoin miners could help solve Big Oil’s gas problemA report released by the Bitcoin Mining Council in January revealed that the Bitcoin mining industry increased the sustainable energy mix of its consumption by nearly 59% between 2020 and 2021. The Bitcoin Mining Council is a group of 44 Bitcoin mining companies that represent over 50% of the entire network’s mining power.Cointelegraph spoke to Bryan Routledge, associate professor of finance at Carnegie Mellon University’s Tepper School of Business, about the comparison between the carbon emissions from Bitcoin and traditional banking. He stated, “Bitcoin (blockchain) is a record-keeping technology. Is there another protocol that would be comparably secure but not as energy costly as PoW? There are certainly lots of people working on that. Similarly, we can compare Bitcoin to record-keeping financial transactions in regular banks.”The block reward for mining a block of Bitcoin currently stands at 6.25 BTC, over $190,000 as per current prices, and the current average number of transactions per block stands around 1,620 as per data from Blockchain.com. This entails that the average reward of one transaction could be estimated to be over $117, a reasonable reward for a single transaction.Routledge further added, “Traditional banks are a far larger size and so, in aggregate, have a large impact on the environment. But for many transactions, there is a much lower per-transaction cost — e.g., an ATM fee. BTC has lots of benefits, arguably. But surely becoming more efficient seems an important step.”Since gauging the true impact of Bitcoin is not really a quantifiable effort due to the significant change that the technology and the currency represent, it is important to remember that the energy consumption of Bitcoin can’t be vilified in an isolated manner. The global financial community often tends to forget the high impact of the current banking system that is not offset by corporate social responsibility and other incentives alone.

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Ideas vs. practice: How are regulators working together on crypto?

Ideas vs. practice: How are regulators working together on crypto?

Uverejnil používateľ | máj 25, 2022 |

The regulation of cryptocurrencies across the world is a constant battle for investors in a rapidly expanding and constantly changing ecosystem. Various regulatory agencies around the world view digital assets in a different light that vary significantly from one another.Recently, executive board member of the European Central Bank (ECB) Fabio Panetta mentioned in a written statement for a speech to Columbia University that regulators should follow a globally coordinated approach while regulating digital assets. He said that the world should have digital assets regulated by the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) rules of the Financial Action Task Force. Panetta also spoke about strengthening public disclosure, reporting on regulatory compliance in the industry and setting up certain “transparency requirements” and “standards of conduct.” He stated:“We need to make coordinated efforts at the global level to bring crypto-assets into the regulatory purview. And, we need to ensure that they are subject to standards in line with those applied to the financial system. We should make faster progress if we want to ensure that crypto-assets do not trigger a lawless frenzy of risk-taking.”Practicality of global regulation in questionThe ECB applying such rules across the European Union is one thing, and having the same rules apply to the all the countries in the world is a whole other due to the fact that ECB can behave as the regulatory entity in the EU. Still, there is no clear understanding of which regulatory body would have the authority to conduct such coordinated regulatory activities.Even more recently, Ashley Alder, chair of the International Organization of Securities Commissions — an association of market regulators — spoke about this aspect in an online conference organized by the Official Monetary and Financial Institutions Forum. He elaborated on the need for a joint body that will be tasked with coordinating the regulation of digital assets around the world and could even be a reality within this year.On May 16, the Basel Institute of Governance and the International Academy of Financial Crime Litigators published a paper that also called for further coordinated action against unlawful crypto markets. The paper suggested that investigators that are involved with cryptocurrencies should invest in learning approaches and technologies to keep up pace with the evolving techniques of criminal organizations and entities.Cointelegraph spoke with Bianca Veleva, head of legal and regulatory compliance at Nexo — a crypto lending platform — about the advantages of a global regulatory approach. She said:“The adoption of a unified legal framework and/or principles for crypto-related activities may prove beneficial in terms of accelerating the legislative efforts of countries which have not yet recognized the advantages that the crypto industry brings, following from the comprehensive framework that more forward-looking countries have already adopted and implemented.”As the digital assets landscape expands and regulations begin to get clearer, a new paradigm could be underway wherein international regulatory consensus unifies. The mass adoption and increasing use-cases of digital assets and blockchain technology alike are bound to provide a solid foundation for the eventuality of a consensus among regulating bodies and nations.However, there are many countries that have outright banned their citizens from indulging in cryptocurrencies and even their services. A prime example of that would be China, which announced an outright ban on digital assets in September last year. There are a total of nine countries that have banned cryptocurrencies, in addition to China: Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia have a blanket ban on crypto, according to a Law Library of Congress report from November 2021.Recent: El Salvador’s Bitcoin play: What does the current slump mean for adoption?This difference in the way various countries view digital assets could serve as the biggest obstacle to a globally coordinated regulatory framework. Igneus Terrenus, policy advocate at Bybit, told Cointelegraph that while a global regulatory system makes sense for tracking fund flows and reducing regulatory arbitrage, the reality is that there is no universal regulatory body capable of imposing it upon sovereign states. Realistically, it will have broader impacts on citizens and residents of countries that responded positively rather than countries that choose not to partake. Terrenus added that “A blanket framework that fits the whole world does not seem to be attainable given the disparities between countries in even existing financial regulations. A feasible model would focus on easing the exchange of information between entities and jurisdictions, which tax authorities are already doing via the banking system, deploying zero-knowledge proof technology to prevent fraud and improving regulatory clarity and consistency.”Another aspect to consider in the hypothetical eventuality of globally accepted regulations for cryptocurrencies is that a consensus between various countries at different stages of adoption could lead to innovation being stifled and a plateau in adoption rates. Veleva said:“Any joint efforts of unifying the currently pending EU regime for crypto-assets with the United State’s legislative framework may be a double-edged sword. They may, in fact, impede the pace of innovation and crypto adoption at an EU level and lead to greater regulatory difficulties for crypto companies.”Coordination like never before Despite the difficulties and challenges involved, some participants in the digital assets ecosystem remain positive about a move toward globally coordinated crypto regulation. Justin Choo, group head of compliance of Cabital — a cryptocurrency trading and passive income platform — told Cointelegraph that the current approach that countries have taken couldn’t be more varied when compared with traditional asset classes like equity, debentures and managed investment schemes that work with a regulated framework.When compared to crypto-forward countries, Choo stated that “I would imagine that a globally coordinated regulatory system wouldn’t go as far ahead as what El Salvador and Argentina are doing simply because the governments of developed countries whose currencies are reserve currencies wouldn’t be ready to give up the economic prowess — which is often used to influence international diplomacy — that they already have in favor of cryptocurrencies.”Global coordination on crypto regulation will require collaboration within the industry and from regulators across the world in a manner that is never seen before. Terrenus said:“Paternalistic protections based on decades-old laws may not be the most helpful approach. Truly sensible, meaningful and impactful regulations should encourage transparency when it comes to the terms, ownership breakdown, vesting schedules and accurate representation of annual percentage yield of crypto projects. This would improve the overall information symmetry and reward investors who do their own research.”Especially after the recent highly-publicized fiasco with the Terra blockchain and its stablecoin, TerraUSD (UST), regulators have begun to take a closer look at the feasibility and viability of stablecoins as well. The European Commission has also revealed its intentions of placing a blanket ban on large-scale stablecoins, considering the massive economic and investor impact that was triggered by the crash of UST and Terra (LUNA) in the Terra blockchain.Recent: Enforcement and adoption: What do UK’s recent regulatory aims for crypto mean?As the adoption of digital assets increases, moving from one adoption and innovation cycle to another, the evolving regulatory landscape will be the most vital part of the transition of digital assets penetrating the masses. A global regulatory framework seems like the ideal solution for the transition, but the obstacles set in the way of implementing such a framework will make the transition a long process and it is highly unlikely that it would happen within a year.Andreessen Horowitz — a crypto-friendly venture capital firm — recently released its “2022 State of Crypto” report, highlighting that the growth of decentralized markets has gone to a total value locked of more than $100 billion just within two years after the concept was first introduced. The report estimates that decentralized finance (DeFi) would be the 31st largest U.S. bank by assets under management.It is only natural that such a rapidly expanding industry will require regulators and central banks to innovate and evolve at the same pace. Even if a highly laborious globally-coordinated regulatory framework slightly stifles innovation, the protection of investors is always the prime concern for regulatory bodies across the globe.

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Crypto mixers’ relevance wanes as regulators take aim

Crypto mixers’ relevance wanes as regulators take aim

Uverejnil používateľ | apr 12, 2022 |

Cryptocurrency mixers have been an interesting topic of discussion ever since the advent of cryptocurrencies and their adoption by retail investors around the world. Cryptocurrency mixers are services that essentially focus on one feature of a blockchain network: privacy. Cryptocurrency mixers, also known as tumblers, provide anonymity so no one can trace the sender or receiver of a transaction. This can help protect the identity of individuals who want to be completely anonymous and non-traceable. How cryptocurrency mixers work is that they break down the funds sent using the mixer and scramble them with other transactions. They break the link which associates the holder’s identity to the crypto they own.A process used to anonymize cryptocurrency transactions is known as CoinJoin, created initially back in 2013 by Bitcoin (BTC) developer Gregory Maxwell. In the thread on the Bitcointalk forum, Maxwell elaborated on how these transactions are structured and how the privacy of the transitions can be significantly enhanced without making huge changes to the network. Essentially, this concept involves a mixing block box from where users get their transactions and comprises hundreds of transactions from various wallets. CoinJoin is one of the most popular cryptocurrency mixers on the market.There are primarily two kinds of mixers, centralized and decentralized mixers. Centralized mixers receive cryptocurrency from users into the mixer and send back different cryptocurrencies by charging a fee. The transaction addresses of the several users who deposit their cryptocurrency into the mixers are managed by a program. Cryptocurrencies returned to users are not the same as those initially deposited, and they may be returned to the user’s account through more than one transaction. In contrast, decentralized mixers utilize other crypto protocols to obscure transactions using either a coordinated network or peer-to-peer (P2P) networks. Cointelegraph discussed the pros and cons of centralized and decentralized mixers with Marie Tatibouet, chief marketing officer of crypto exchange Gate.io. She said:“Centralized services are obviously more accessible and more approachable. However, they will have access to your Bitcoin and IP addresses. Hence, they are not the most private service in the world. Decentralized mixers can be a little less approachable, but they are a lot more private.”Related: What is a cryptocurrency mixer, and how does it work?However, cryptocurrency mixers and tumblers have a bad reputation since they may be used for money laundering or masking huge amounts of earnings. Although not illegal by law, the service providers stand a chance to get embroiled in a crypto money-laundering investigation. There have been several instances where cryptocurrency mixers and their users have come under the scanner by various jurisdictions and governments. Mixers could be in a gray area Most recently, the United Kingdom’s National Crime Agency wants to regulate cryptocurrency mixers under the country’s relevant Anti-Money Laundering (AML) laws.The agency’s head of the financial investigation, Gary Cathcart, said that transaction mixing tools offer a layer of anonymity to criminals, allowing them to maintain the flow of criminal cash by obscuring its origin. According to Cathcart, subjecting mixers to AML laws would ensure that mixing services conduct thorough AML checks and audit all the transactions that are passing through the mixer. While on the surface, this might seem like an idea that works, there is a high possibility that such checks would discourage any users attempting to use the mixer.A closer look at the numbers reveals that the concerns of the crime agencies are not without reason. A recent report from blockchain analytics firm Chainalysis called “2022 Crypto Crime Report” found that the total cryptocurrency value received from illicit addresses hit an all-time high of $14 billion in 2021, nearly doubling from $7.8 billion in the previous year. At the same time, it is also worth noting that the total market capitalization of the entire market has grown significantly along with the adoption of digital assets by retail investors. Chainalaysis’s crime report also highlights the Illicit percentage share of all cryptocurrency currency, which was at a four-year low of 0.15% in 2021. This indicates that as the digital asset market develops further, the checks and balances being placed on transaction routes by market participants have been acting as a deterrent for criminals and money laundering activities alike. In fact, most of the transactions flagged as received from illicit addresses are from hackers that stole funds from various DeFi protocols like Wormhole and Poly Network in 2021.Anton Gulin, regional director at crypto exchange AAX, told Cointelegraph that the whole essence of mixers is not illegal by default. “However, some countries are steadily imposing the Financial Action Task Force’s Travel Rules, providing that exchanges and other virtual asset market players must collect, verify and transmit originator and beneficiary customer information for any cryptocurrency transaction.”The imposition of this rule prevents regulated entities like centralized exchanges from receiving funds from mixers, which, in turn, puts the entire activity into a gray area. Adrian Jonklass, head of research at blockchain API provider Covalent, told Cointelegraph:“They operate in a gray area because at a global level the regulations around fundamentals of what comprises virtual assets, whether they fall under money transfer regulations, and or commodity regulations and or securities regulations and or some new category is still being developed.”The FATF’s rule on the digital assets industry has the potential to curb activity even further. A survey of crypto businesses conducted by Notabene, a crypto compliance firm, found that 70% of the respondents are either already following the Travel Rule or are planning to align their compliance to it in early 2022.Relevance of crypto mixers in 2022While cryptocurrency mixers are originally designed to further anonymity and privacy, the evolution of blockchain technology and innovations like whitelisting and decentralized identifier protocols could make them less relevant.Guilin said that there is no apparent benefit to using a crypto mixer in 2022, stating that “by now, it’s widely associated with something illegal and is indeed related in the majority of cases. Therefore, most of the mixer addresses have been clustered by Know Your Customer providers and are easily traceable.” This means that users cannot use their funds after mixing them without being traced by the market participants, as transactions withdrawn from a mixer are marked and go against the logic of using a mixer in the first place. Cryptocurrency mixers definitely still have the potential to appeal to the original crypto romantics that consider the privacy and anonymity of their cryptocurrency transactions a high priority. However, their relevance today could be waning due to the retail adoption models and other checks and balances that the market participants in the ecosystem are now utilizing. The industry and blockchain technology at large have evolved exponentially since Maxwell spoke of the concept of CoinJoin; It could be important for service providers to realize this as well.

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Stranded no more? Bitcoin miners could help solve Big Oil's gas problem

Stranded no more? Bitcoin miners could help solve Big Oil's gas problem

Uverejnil používateľ | mar 18, 2022 |

The energy usage and environmental impact of Bitcoin (BTC) mining have been frowned upon and been under the scanner by various international financial institutions. The International Monetary Fund (IMF) mentions how Bitcoin mining consumes “vast amounts of computing power and electricity.”Bitcoin mining is an energy-consuming process, as it is a proof-of-work (PoW) blockchain network that involves providing cryptographic proof to the network that a quantified amount of a specific computational effort has been used. The information used to verify this is stored in a block to be accepted into the network by other participants. Elon Musk, one of the richest men in the world and the co-founder and CEO of Tesla, in February 2021 announced that the car manufacturing company will accept Bitcoin as payment for its products and services. But, in May of that same year, Tesla discontinued its support for the acceptance of Bitcoin payments, citing the company’s concerns about the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal.” This also led Musk to hail Dogecoin (DOGE) as a better means of payment than Bitcoin due to the high environmental cost of BTC transactions.Energy usage trend over past few months is insane https://t.co/E6o9s87trw pic.twitter.com/bmv9wotwKe— Elon Musk (@elonmusk) May 13, 2021However, a new solution seems to be emerging that has the potential to address the narrative that has permeated the mainstream conscience. Associated natural gas is a byproduct of oil drilling, the volume of which is often outweighed by the costs of getting it to a refiner, leaving it “stranded” at the well. Thus, it is often just burned off at the oil derrick, earning it the moniker “flare gas.”On Feb. 17, CNBC reported that the oil giant ConocoPhillips is running a pilot program in Baken, North Dakota. Instead of burning associated gas, the company is selling it as fuel to third-party Bitcoin miners.The idea of using associated gas to mine Bitcoin is not new. Back in 2019, Brent Whitehead and Matt Lohstroh started the company Giga Energy Solutions, which mines Bitcoin with electricity generated from such gas. The firm delivers a shipping container that is full of Bitcoin mining equipment to an oil well and then diverts the stranded natural gas into generators that convert the gas to electricity, using it to mine Bitcoin.Crusoe Energy is another company that uses the energy from flare gas to mine Bitcoin. The firm has grown to become one of the biggest players in the space and has also received investment from one of the oldest cryptocurrency exchanges in the world, Coinbase and Winklevoss Capital, a company founded by the Winklevoss twins, the founders of crypto exchange Gemini.A report from Crusoe Energy Systems claimed that using this gas to mine Bitcoin reduces CO2-equivalent emissions by about 63% compared to the continued flaring of the gas.Cointelegraph spoke with Ethan Vera, chief financial officer and chief operations officer at Viridi Funds, a company that offers crypto investments to Bitcoin miners, about the impact of ConocoPhilips involvement in the innovation. Ver said, “While ConocoPhillips is one of the major energy companies that have publicly announced their entry into Bitcoin mining, there are many other energy companies that have already started the process of setting up mini-test sites. If the economics of Bitcoin mining increase and total mining revenue on a USD basis grows, many of the large energy producers will look to enter the space in a bigger way.”Energy impact of Bitcoin mining could be overratedAs per the University of Cambridge’s Cambridge Bitcoin Electricity Consumption Index metrics, the estimated power demand for the Bitcoin network is 15.57 GW (GigaWatts) which annualizes at 136.48 TerraWatt hours (TWh). The look at historical data of power demand for the network reveals that this demand is continuously increasing through the years as the network grows.Despite this increase in demand for power, the environmental impact could be overrated. A report from CoinShares released in January this year attempted to gauge the carbon emissions caused by Bitcoin mining. Contrary to popular belief, the report’s findings suggest that Bitcoin mining only accounts for 0.08% of the world’s carbon dioxide, or CO2, production. The report found that the network emitted 42 megatons (Mt) (1Mt = 1 million tons) of CO2 in 2021 out of the world’s total emissions of 49,360 Mts of CO2.Sam Tabar, chief security officer of Bit Digital, a publicly-traded Bitcoin mining company, told Cointelegraph:“The environmental impact of Bitcoin mining is massively exaggerated by traditional financial authorities (IMF, etc.) because they know they can divide a new counterculture movement by using fake environmental arguments. They are trying to gaslight us against each other. They gaslight the world with fake green arguments, and I understand why: They don’t want to lose influence over the levers of power of a system that only works for the elite.”Related: Are we misguided about Bitcoin mining’s environmental impacts? Slush Pool CMO Kristian Csepcsar explains.In this regard, Vera mentioned that gauging the environmental impact of Bitcoin is a highly nuanced topic and is one that can’t simply be explained by the energy consumed metric. He said that “In many cases, Bitcoin mining incentivizes the development of renewable energy which will have profound impacts on long-term energy infrastructure and environmental impact.”Oil giants could lead the change to make Bitcoin greenConsidering that using stranded natural gas to mine Bitcoin could reduce the net carbon emissions of mining, as well as reduce emissions from flare gas, other major oil companies could soon jump on the opportunity, especially as governments and regulators have been cracking down on gas flaring.In November 2020, Colorado regulators gave the initial okay to ban gas flaring in order to curb methane pollution. Regulators in the state of New Mexico imposed a rule in March 2021 that requires oil operators to gradually eliminate gas flaring. The rule dictates that 98% of the nature-stranded gas should be captured by April 2022 instead of flaring.However, such decisions are highly difficult to pass in a country where both sides of the government are heavily dependent on lobbying from big oil companies. In October 2021, Bloomberg reported that President Biden’s crackdown on methane emitters is set to stop short of imposing a ban on flaring.An outright ban on gas flaring would be good news for the Bitcoin mining industry as that oil producers would have either of two options. First, to reduce the production output of oil which wouldn’t be economically viable. Or, second, utilize excess stranded natural gas on-site, which is where Bitcoin miners could step in to create synergies with big oil companies like ExxonMobil, British Petroleum (BP), Chevron or Valero Energy.Vera stated that “With high oil prices, the majority of these producers are turning to utilize the stranded gas on-site such as Bitcoin mining, instead of burning it up. We expect the trend to continue in the future as more governments regulate the ability for oil companies to flare excess gas.”The World Bank also has its own initiative to help reduce gas flaring around the world. The Global Gas Flaring Reduction Partnership (GGFR) is a multi-donor trust fund that comprises governments, oil companies and multinational companies that are committed to reducing gas flaring. Bitcoin mining pools and companies could enter collaborations with this trust fund to further this initiative.However, oil companies could have a two-faced approach to the issue at hand, thus, raising questions on their intentions. For example, in 2020, BP urged regulators in Texas to ban the routine flaring of natural gas. But, in January 2021, the Texas Railroad Commission passed 121 of the company’s requests for flaring.With regulators and governments around the world cracking down on gas flaring, the Bitcoin mining industry has an opportunity to reduce the CO2 emissions and methane pollution in the atmosphere. Vera concluded on this synergy, stating that “Bitcoin miners are a natural partner to all energy producers including renewable and oil and gas. Bitcoin mining improves the ability for these companies to manage and utilize their resources in the most profitable way.”

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