According to a recent analysis from the European Central Bank (ECB), climate change may necessitate carbon taxes on crypto transactions and a prohibition on mining proof-of-work assets such as Bitcoin (BTC).
The paper concludes that it would make sense for EU authorities to go after proof-of-work blockchains for the same reason that they opted to extensively restrict gasoline automobiles in order to reduce greenhouse gas emissions.
“It’s hard to understand how authorities could restrict petrol automobiles during a transition period yet ignore Bitcoin-type assets created on proof-of-work technology, with country-sized energy footprints and annual carbon emissions that negate most Euro area nations’ past and projected GHG saves.
Public authorities have the option of rewarding the crypto equivalent of the electric vehicle (proof-of-stake and its numerous blockchain consensus mechanisms) or restricting or banning the crypto equivalent of the fossil fuel automobile (proof-of-work blockchain consensus mechanisms).”
It is conceivable for authorities to do nothing, but the most probable consequence is a complete ban on mining Bitcoin and other proof-of-work crypto assets and the establishment of a carbon tax on digital asset transactions.
Policy intervention by authorities (such as transparency requirements, a carbon tax on crypto transactions or ownership, or complete bans on mining) is thus expected rather than a hands-off attitude by public authorities.
According to the paper, the prices of virtual assets might be altered by such rules. The price effect on crypto assets targeted by policy action will depend on its severity and whether it’s global or localised.
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