The Swedish central bank published a paper arguing that energy-intensive Bitcoin (BTC) and cryptocurrency mining should be prohibited.
The Riksbank, the central bank of Sweden, is the world’s oldest central bank. The bank took a dig at PoW cryptocurrency mining in a stinging report titled “Cryptocurrencies and their Impact on Financial Stability.” PoW mining makes use of energy-intensive data centers to solve puzzles in order to safeguard blockchains. According to the report:
“Recently, some extraction of crypto assets has been established in northern Sweden, where it consumes as much electricity as 200,000 households do on an annual basis.”
“A Central Bank has no business telling individuals what they can and cannot do with their electricity,” Knut Svanholm, a Bitcoin novelist who just published “/21M,” told Cointelegraph.
“If they really cared about the environment they’d shut their own operation down for good tomorrow morning.”
In its study of Bitcoin’s energy use, the document cites peers at the environmental agency and the Swedish Financial Supervisory Authority, which is similar to the US Securities and Exchange Commission:
“The proof of work method, which is used to confirm transactions and extract new cryptocurrencies, should be banned in favor of other, less energy-intensive methods.”
“Bitcoin mining” is, in Svanholm’s opinion, “guessing a number over and over again.” […] They [the central bank] chose to remark on something they don’t understand and have no business having an opinion on, as so many other Swedish organizations have done before them.”
The study is unsurprising, given that banks and governments frequently target PoW energy usage. The revelation also contradicts Sweden’s embrace of Bitcoin. Sweden, which is home to a number of Bitcoin firms, is a leader in European Bitcoin adoption.
On Twitter, prominent Swedish Bitcoiners such as Svanholm and Christian Ander, the founder of the Swedish Bitcoin exchange BTX, quickly debunked the allegation. “None of the energy required for Bitcoin mining goes to waste,” Svanholm claimed in a YouTube video.
The report was deemed “very inappropriate” by Ander. He wrote on Twitter:
“Energy consumption must be neutral, production must be regulated. Do not regulate what individuals do with it.”
The stats for Bitcoin mining are stark as the bank’s pals at the International Monetary Fund march forth with a central bank digital currency — which would use less energy — because it would require less energy. Bitcoin was named the world’s cleanest industry in late 2021, thanks to its high renewable energy mix. Bitcoin miners in neighboring Norway employ 100 percent renewable energy, and Bitcoin miners all over the world try to make the world a better place.
The proposed restriction comes on the same day as research on the energy efficiency of crypto transactions is released by the Swedish central bankers. According to the report:
“When Bitcoin Lightning layer is compared to Instant Payment scheme, Bitcoin gains exponentially in scalability and efficiency, proving to be up to a million times more energy efficient per transaction than Instant Payments.”
The Lightning Network for Bitcoin has passed the 4,000 BTC mark, demonstrating its potential as a payment system. Lightning payments are made off-chain and consume a fraction of the energy used by Bitcoin miners to protect layer one of the network.
Nonetheless, according to the Cambridge Centre for Alternative Finance, Bitcoin requires about 15 GW of electricity per day. One Twitter user’s back-of-the-napkin arithmetic argues that clothes driers in the United States utilize more energy:
The worldwide sports sector emits three times the emissions of the Bitcoin network, according to an Our World in Data research. Why, then, do central banks continue to fight PoW’s energy consumption? And who will be the next financial institution to fire a shot?