Ukraine-Russia war puts limelight back on bitcoin – and its carbon footprint

Bitcoin prices are climbing once again and while bitcoin mining is likely to come under renewed fire for its energy consumption, this should not prove fatal for the cryptocurrency.

Bitcoin prices jumped by 13% on Tuesday on the back of new Western sanctions on Russia for its invasion of Ukraine. Cryptocurrencies are becoming a more mainstream part of the global financial system – and therefore a part of international conflict too. In the current crisis, bitcoin is serving as a conduit for millions of dollars of aid to Ukraine and an alternative to traditional banks, free from government control. It could also help Russia sidestep sanctions.

Once a niche activity, Bitcoin mining became mainstream news when it took down Kazakhstan’s national power grid in January 2022. Home to one-fifth of the world’s Bitcoin mining activity, the country’s state electricity provider cut the supply to Kazak bitcoin miners following power outages across three countries in Central Asia.

Bitcoin is not new to controversy, from its association with crime and money laundering to facilitating trade in contrabands on the now defunct dark web equivalent of Ebay – Silk Road. However, there are real-world indicators that cryptocurrency, along with its associated mining activities, has become a legitimate prospect for mainstream investors. In a landmark decision on 7 February 2022, Nasdaq approved crypto asset manager Valkyrie’s application to list its exchange-traded fund (ETF), offering exposure to stocks in Bitcoin mining companies. The Valkyrie Bitcoin Miners ETF will invest at least 80% of its net assets in securities of companies that derive a minimum of 50% of their profit from Bitcoin mining, according to the Securities and Exchange Commission’s filing.

Yet at the same time as both mainstream and institutional investors acknowledge the investment potential of Bitcoin mining, the industry faces another perhaps more significant hurdle: its undeniable increasing energy consumption.

Bitcoin prices jumped by 13% on Tuesday on the back of new Western sanctions on Russia for its invasion of Ukraine. Cryptocurrencies are becoming a more mainstream part of the global financial system – and therefore a part of international conflict too. In the current crisis, bitcoin is serving as a conduit for millions of dollars of aid to Ukraine and an alternative to traditional banks, free from government control. It could also help Russia sidestep sanctions.
bitcoin-mining-energy
A server room at the BitRiver data centre in Bratsk, Russia, shows the scale of operations involved in Bitcoin mining, and the level of energy used. (Photo by Alexander Ryumin/Tass via Getty Images)

Once a niche activity, Bitcoin mining became mainstream news when it took down Kazakhstan’s national power grid in January 2022. Home to one-fifth of the world’s Bitcoin mining activity, the country’s state electricity provider cut the supply to Kazak bitcoin miners following power outages across three countries in Central Asia.

Bitcoin is not new to controversy, from its association with crime and money laundering to facilitating trade in contrabands on the now defunct dark web equivalent of Ebay – Silk Road. However, there are real-world indicators that cryptocurrency, along with its associated mining activities, has become a legitimate prospect for mainstream investors. In a landmark decision on 7 February 2022, Nasdaq approved crypto asset manager Valkyrie’s application to list its exchange-traded fund (ETF), offering exposure to stocks in Bitcoin mining companies. The Valkyrie Bitcoin Miners ETF will invest at least 80% of its net assets in securities of companies that derive a minimum of 50% of their profit from Bitcoin mining, according to the Securities and Exchange Commission’s filing.

Yet at the same time as both mainstream and institutional investors acknowledge the investment potential of Bitcoin mining, the industry faces another perhaps more significant hurdle: its undeniable increasing energy consumption.

Energy intensive and highly lucrative, global Bitcoin mining operations have sprung up in locations with favourable (or else a vacuum) of regulation and an abundance of cheap power. High-profile cases such as Kazakhstan’s energy crisis mean the sector can no longer slip under the radar of policymakers. In fact, Bitcoin mining is facing increasing regulatory scrutiny, as shown by the Chinese government’s blanket ban in May 2021, which shifted the global centre of gravity of Bitcoin mining elsewhere, a ripple effect that saw countries such as Kazakhstan and Russia pick up the slack.

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