Joe Biden’s new administration has the opportunity to take the global lead in green mining for digital assets. It’s no secret that a geopolitical battle is brewing over new types of cryptocurrencies – both backed by the state and private – and the best location for new capital formation and technological advancements. To win this global competition, the new US government must ensure greater regulatory clarity for digital assets while also ensuring that the mining process, and a huge drain on energy resources and contributes to global warming, is done in an environmentally sensitive way.
Some of the leaders of the new administration should work together to formulate policies to encourage development in this growing industry. Gary Gensler, the former chairman of the Commodity Futures Trading Commission, who is expected to lead the Securities and Exchange Commission, looks forward to a more enlightened and proactive approach by regulators on digital assets. After all, he has just finished teaching a blockchain course at MIT, sees technology as a “catalyst for change,” and is seen as a threat to the legacy financial system. That’s all good for the disruptive financial technologies.
James Cooper is a Professor of Law and Associate Dean of Experiential Learning at Western California Law School. He moderates a panel for Digital Davos on Jan. 20 on ethics and technologies in developing countries.
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Also, the nomination of former Secretary of State John Kerry to a cabinet-level post as Special Presidential Ambassador for Climate, signals the new administration’s commitment to tackling climate change globally. He understands the importance of cryptocurrency. At the World Economic Forum three years ago this week, Kerry was quoted as saying that cryptocurrency “has value.” Together, these two appointees can ensure that the country leads the development of fintech in preventing crypto mining from contributing to increased greenhouse gases.
Numerous projects abroad are already subject to success in the green mining space and can serve as models for the United States. In 2019, Bitfury established mining centers in Paraguay, home of South America’s largest hydro-electric project – Itaipu Dam – the world’s largest renewable clean energy generator. The government in Asunción has supported the Institute of Commons’ Golden Goose project, in its quest to establish the region as the world’s largest crypto mining center. But there is a challenge to keep the Paraguay project itself from contributing to greenhouse gases given the intense heat that the tropical country faces all year long. It would be counterproductive to use large amounts of energy to cool the computers even if the energy was generated from renewable sources.
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Cost-effective renewable energy-based mining centers have also been set up in Russia’s frozen lands in Siberia. The city of Norilsk is home to the Norilsk Nickel mining behemoth but bitcoin mining is increasingly becoming an important economic driver. With winter temperatures bottoming out at minus 40 degrees Celsius (which is about minus 40 degrees Fahrenheit), this is the perfect climate for keeping computer machines cool. It’s much cooler than Paraguay for sure.
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Nor should we forget China, home to over half of the world’s bitcoin miners, most of whom are based in Sichuan because of low energy costs, powered by hydroelectric facilities. That the area has suffered some of the worst flooding in recent 70 years, largely due to climate change, shows that there is as much irony to play here as hash rates. Poolin, which controls the majority of BTC’s hash rate, has struggled with constant energy supplies and some of its mining farms have been flooded by monsoon flooding. Even with the province’s vast hydroelectric capabilities, the authorities in the People’s Republic of China have generally outlawed the digital asset industry – mining mining, exchanges and industry conferences.
A safer and geographically close project is being introduced near the Churchill Falls hydroelectric plant in Labrador, a remote part of Eastern Canada. Pow.re, a Montreal company with Asian investors, takes advantage of the stuck energy generated by NL Hydro. This hydroelectric facility has long been emitting traces of mercury, so the project meets many of the goals of environmental protection and sustainable development. Temperatures rarely exceed 60 degrees Fahrenheit in the summer, ensuring the machines stay cool. The only source of waste is heat – which is a luxury in the sub-Arctic region where they mine.
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The United States has much to learn from such foreign green mining projects. There are some new initiatives to encourage bitcoin mining on the state side (including a new legislative bill in Kentucky to provide state tax incentives), but many of these are not green and could contribute to earth warming. Coal-fired power plants supply 73% of Kentucky’s electrical generation, for example, ruining the greenery of that project. (In contrast, the Layer1 mining project in Texas is valued for its environmental performance.)
And while generous and clean electricity is vital to providing hash rates that are cost-effective and have little impact on the environment, so too do champions in major policy-making positions. The combination of Gensler and Kerry in the Biden administration can help position the United States at the forefront of green mining. President Biden pledged to “build back better.” Green mining is one such way. Private companies are taking advantage of this opportunity, too: Square Crypto recently announced a $ 10 million fund to promote projects that use green energy for bitcoin mining.
The US government has much to gain by providing regulatory clarity for fintech and environmentally sound policies for cryptocurrency mining. If not, there are plenty of other countries to take the lead and profit accordingly.