A Shiba Inu. Pixelated heads. Venezuela.

While this sounds like the beginning of a joke about walking into a bar, they are, in fact, all unified by cryptocurrency.

Although cryptocurrency was once considered a fringe phenomenon, American interest has recently spiked, in part thanks to Tesla’s co-founder, Elon Musk. He helped popularize cryptocurrencies and NFTs with his constant tweets about popular cryptocurrencies like Dogecoin, Ethereum, and Bitcoin. When Musk announced that Tesla would accept Bitcoin for its products, Bitcoin’s value increased dramatically, and people began earnestly researching cryptocurrencies.  Today, such terms are almost as recognizable in common parlance as Twitter or Google. Megan Thee Stallion has spoken about crypto and an NFT by the artist Beeple sold at Christie’s Auction House for $69 million.

However, as more people started engaging with cryptocurrencies, the damaging impact of crypto mining on the environment came to light. Mining is the process by which individuals add more value to their cryptocurrency “wallets.” It uses single-purpose, specialized hardware that relies on “proof-of-work” algorithms. These algorithms require computers to complete complex mathematical functions that use enormous amounts of electricity to generate any meaningful amount of crypto.  In order to store cryptocurrencies in a stable way, individuals utilize blockchain technology, a decentralized public digital ledger that records and stores transactions across many computers and protects those records from being altered, deleted, or destroyed without alterations to all subsequent blocks. Unfortunately, this also requires substantial amounts of energy to operate and maintain.

Annually, cryptocurrency’s power usage rivals that of the entire nation of Poland.  The mining process also puts an enormous strain on the computer hardware it uses, generating tremendous amounts of electronic waste, or e-waste. Such waste includes everything from plastic to heavy metals, and this waste often cannot be recycled. Regardless of how much currency is exchanged, each crypto transaction between miners puts the equivalent of half an iPad’s worth of waste into a landfill. Annually, the crypto industry creates the same amount of e-waste as the Netherlands.

Legislation and Regulation of Cryptocurrency

Technology and environment experts, as well as everyday consumers, have increasingly scrutinized cryptocurrency’s environmental effects. As a result of their disturbing findings, they have called for legislative and agency intervention in blockchain users’ and trading networks’ potentially harmful behavior.

National and administrative decision-makers, governments, and authorities have responded differently. For instance, on the international level, eight countries, including China, Egypt, and Iraq, banned trading and mining for cryptocurrency altogether. Before the ban, China engaged in between 65% and 75% of global transactions and mining. China’s ban initially caused a sharp drop in energy usage. However, other nations’ users, especially Americans, quickly filled that vacuum.  As a result, power usage is nearly the same level as before China’s ban.

The United States Commodity Futures Trading Commission (“CTFC”) has classified cryptocurrencies, renewable energy allowances, and emissions allowances under the umbrella term “commodity.” Intangible goods classified as commodities fall under the Commodity Exchange Act (“CEA”). The CEA only prevents fraudulent crypto-related conduct by regulating cryptocurrencies, the same way an agency regulates renewable energy or emissions allowances trading..  It does not enable the government to monitor or regulate individuals trading cryptocurrencies for energy usage or electronic waste. In early October of 2021, more than 70 nonprofits urged Congress to consider crypto’s energy usage in new regulations regarding the sector. Only time will tell whether Congress will take such concerns into account.

In the absence of congressional action and federal regulation, state legislatures are proposing bills to limit crypto’s environmental harm. From 2021 to 2022, the New York state legislature proposed twenty-one bills calling for decreases or bans on large-scale proof-of-work operations for crypto mining. Senator Kevin S. Parker sponsored a bill proposing a moratorium on new mining operations, but the bill died in Assembly on June 10, 2021. At a more local level, municipalities have regulated limits on the output of data centers located within their jurisdiction.  For example, Missoula County, Montana, requires cryptocurrency companies to buy or generate renewable energy equal to the amount they use. 

While many involved in crypto have sought to mitigate its environmental effects, there will continue to be very little accountability without laws or policies enforcing penalties for e-waste generation or energy overconsumption. Our legislatures must protect our environment from novel technology that currently causes more harm than good.