The Biden administration is developing policy proposals to reduce energy consumption and carbon emissions from crypto mining

According to Bloomberg Law, the Biden administration is developing policy proposals to reduce energy consumption and emissions from cryptocurrency mining, with critics arguing that the industry threatens U.S. climate goals and puts more pressure on the power grid. Costa Samaras, chief assistant director for energy at the White House Office of Science and Technology Policy, told Bloomberg Law: "If the crypto industry is to be part of our financial system in any meaningful way, it must be developed in a responsible way and minimize overall emissions. When we think about digital assets, it has to be a climate and energy conversation."

The policy recommendations report, expected to be released in August, will likely be one of the first studies following President Joe Biden's executive order in March directing federal agencies to ensure digital assets such as cryptocurrencies are mined "responsibly."

The Department of Energy is responsible for issuing efficiency standards and researching clean technologies, but no one has spoken out on the issue of energy use by cryptocurrencies. The Environmental Protection Agency broadly does not regulate energy use by specific consumers or industries. The EPA's inaction on the issue also drew criticism from some congressional Democrats in April. Some believe the federal government's role is to issue disclosures to investors and then push cryptocurrency miners to clean up their operations.

“I really have a hard time seeing some kind of ‘big stick policy’ coming out,” said Jesse Morris, CEO of Energy Web. “I think the most valuable thing is education and disclosure about bitcoin mining.”

Energy consumption of mining

In order to complete and verify transactions of Bitcoin, Ethereum and other tokens, digital currency mining has become an energy-intensive industry, and the mining behavior has already impacted the power industry, which is facing a precarious situation. The power industry itself is experiencing crises such as coal energy shortage, new energy development, and extreme weather. When the power consumption pressure of the emerging digital currency industry is added, not only the United States, but also the global power supply is under pressure.

According to CryptoMonday, a single Bitcoin transaction consumes about 2,165 kWh of electricity, which is equivalent to more than two months of electricity consumption for an American family. The same amount of electricity can be used by a family in India for a whole year. Bitcoin mining emitted 70 million tons of carbon dioxide in 2020, accounting for 1% of the world's total emissions.

According to data from the Center for Alternative Finance at the University of Cambridge, Bitcoin mining is expected to consume approximately 119.53 TWh per year. What does 119.53 TWh mean? According to statistics from the French national grid EDF, in 2018, global electricity consumption was approximately 22,315 TWh. Bitcoin mining already accounts for 0.5% of the world's total electricity consumption. If we include ETH and other digital tokens that have not yet switched to the POS model, this proportion will be even greater. The energy consumed by Bitcoin mining is no longer an issue that we can ignore.

Miners are struggling

As the cryptocurrency market enters a cold winter, Bitcoin miners' revenue and profitability continue to decline along with the asset's price. May was one of the worst months for Bitcoin miners in the past year, as mining revenue and profitability continued to decline. According to blockchain website Ycharts, Bitcoin daily mining revenue fell 27% in May. On May 1, the analysis agency reported that Bitcoin miners earned $40.57 million per day, but by the end of the month, this figure had fallen to $29.37 million. On May 24, daily mining revenue hit an 11-month low of $22.43 million.

But at the same time, the Bitcoin network's computing power remains high, reaching 211.8 EH/S, and the network's difficulty is 29.9 T. High hash rate but low profit margins may indicate that the competition in the Bitcoin mining industry is much more intense than we have seen before. In the early bear market, miners may shut down their rigs due to the decline in asset prices and the temporary unprofitability of mining operations.

If miners are unable to make a profit and the Biden administration releases a series of policies to reduce energy consumption and carbon emissions from crypto mining, and if U.S. miners cannot find a cleaner way to mine, they may shut down their mining machines or move to other regions with relatively relaxed policies.