Following last week's U.S subcommittee hearing on crypto mining, Fitch Ratings looks at the key risks to U.S public power utilities.
Crypto mining, power consumption, and the impact of mining on the environment have become hot topics. As regulators across the globe take greater interest in the crypto market, governments have been focusing on crypto mining.
At the start of the year, the Kosovo government banned all crypto mining due to an ongoing energy crisis. The news of the ban coincided with news hitting the wires of a U.S Congress sub-committee preparing a hearing to assess the impact of crypto mining and cryptos on the environment.
Last week, the subcommittee hearing focused on the proof-of-work protocol and the impact to the environment. While there was no clear action plan from the hearing, it was evident that lawmakers were keen to look deeper into crypto mining and power consumption.
Last week, news also hit the wires of the Georgian government forcing citizens to stop mining due to an ongoing energy crisis.
Neither Kosovo nor Georgia account for a material percentage of the global Bitcoin (BTC) hashrate. As a result, there was no major market reaction to the news.
The U.S, however, is the world’s largest Bitcoin mining nation. According to Cambridge Centre for Alternative Finance, the U.S accounted for 35.4% of the global hashrate in August 2021. A move to ban Proof-of-Work mining in the U.S would impact Bitcoin and the broader market. The impact would be more pronounced if Bitcoin miners found other governments unwelcoming.
Last week, news of Russia’s central bank proposing a ban on cryptos and mining was certainly bad timing. The Bank of Russia’s proposal to ban mining was reportedly due to high energy usage and increase demand for crypto infrastructure. The proposal follows calls from the EU to ban Proof-of-Work crypto mining.
Following the surge in government interest in crypto mining around the world, Fitch Ratings talked of the risks that mining poses to public power utilities. Salient points from the Fitch Ratings review included:
While Fitch Ratings did not focus on the environment impact, the possible impact on public power utilities is one other consideration for U.S law makers. There had been plenty of discussion on the subject of power consumption and sources of power for crypto miners in the subcommittee hearing.
Following last week’s U.S subcommittee hearing, more hearings are likely. With President Biden’s climate goals some government action would be likely.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.