LONDON
\nRapid growth in unregulated crypto mining could contribute to energy markets\u2019 disruptions and divert resources from the electrification of other sectors, particularly in emerging markets, said Fitch Ratings in its new report.
\nThe increase in global demand for cryptocurrencies in 2021 and highly profitable crypto mining have created ecosystems that already consume an estimated 0.4%\u20131% of global electricity. However, a greater level of crypto market regulatory oversight, including mining methods and related energy consumption, is likely in most jurisdictions in the longer term, limiting risks to energy utilities, said Fitch Ratings.
\nThe report said that mining of cryptocurrencies such as Bitcoin is often reliant on makeshift data centres or \u201cmining farms\u201d that are unregulated, as are most decentralised markets they serve. Electricity represents up to 90% of crypto mining costs, and therefore the sector is sensitive to electricity prices and its farms are often located close to low-cost energy, particularly where electricity prices are state-subsided.
\nAlthough mining of many cryptocurrencies has advanced from its initial desktop set-up and now requires specialised equipment worth thousands of dollars per farm, such operations are still fairly quick to establish or relocate.
\nBitcoin is still the largest global cryptocurrency, but the digital assets market has experienced rapid growth, particularly in 2021, becoming more diverse with larger energy needs. Bitcoin\u2019s (whose share in crypto assets is about 40%) annualised power demand alone is estimated at 125 terawatt-hour by the Cambridge Centre for Alternative Finance, which is comparable to the electricity consumption of countries such as Norway and Sweden.
\nUnchecked growth of unregulated cryptocurrencies\u2019 energy demand may disrupt the power sector, as the lack of transparency challenges investment planning in energy generation and networks. However, this scenario of prolonged unrestricted expansion is unlikely as regulators are increasing their focus on cryptocurrencies, first and foremost due to their potential impact on financial markets\u2019 stability and their use in illicit activities, but also due to the impact on energy markets and the resulting environmental and social implications.
\nSome countries, such as China, have chosen to ban cryptocurrencies\u2019 mining and trading. Russia has been discussing similar proposals. Many others plan to implement expansive regulatory frameworks to manage digital assets, including standards, supervision and disclosure requirements.
\nDigital currency markets should, therefore, become more mainstream and predictable in the long term, with many aspects, including mining methods, coming under regulatory oversight.
\nFurther requirements may include appropriate registration of mining data centres, require their location to be close to abundant renewable energy sources, and demand response contracts with networks requiring miners to decrease electricity use during peak hours at short notice or to link their energy consumption to periods of low demand, said Fitch Ratings.<\/p>\n","protected":false},"excerpt":{"rendered":"
LONDON Rapid growth in unregulated crypto mining could contribute to energy markets\u2019 disruptions and divert resources from the electrification of other sectors, particularly in emerging markets, said Fitch Ratings in its new report. The increase in global demand for cryptocurrencies in 2021 and highly profitable crypto mining have created ecosystems that already consume an estimated […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":{"0":"post-245770","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-world"},"yoast_head":"\n