ESG Labels For Crypto? Europe Looks To Offset Energy Consumption In Environmental Push

Mining cryptocurrencies consumes a great amount of energy.
In an effort to make the adoption of cryptos more sustainable, the European Commission (EC) is developing the a framework to encourage "the most energy-efficient versions of the technology."

What Happened: By developing a standard that would make it evident how much energy has gone into creating various cryptocurrencies, issuers will be more likely to select the most cost-effective option.

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At the moment, proof-of-work, the consensus used to mine Bitcoin BTC/USD, the largest digital currency by market capitalization, uses as much energy as an entire country.

The proof-of-stake consensus, recently adopted by Ethereum (CRYPTO: ETH), has reportedly seen its energy consumption decline by 99.9%.

The EU nearly decided to outlaw the practice of cryptocurrencies employing proof-of-work.

Crypto-asset providers in the EU must publish the impact of each coin they issue (roughly 10% of the world's proof-of-work mining takes place in EU nations).

The EU is also pushing forward the Markets in Crypto Assets (MiCA) law, one of the first thorough legal frameworks for cryptocurrencies.

Mairead McGuinness, the EU commissioner for financial services, recently asked U.S. legislators to adopt a similar approach and help create global industry standards.
Why It Matters: EU nations are currently navigating an unprecdented energy crisis.

There's also a continent-wide increase in fuel prices as a result of sanctions imposed on Russia, which had previously been a major supplier of affordable gas to several European nations before its invasion of Ukraine earlier this year.

A report on the climatic effect of the crypto industry is currently in the works in order to develop an "energy efficiency label," which the EU seeks to release by 2025.

The EU will recommend that member nations stop any further crypto-mining operations if energy supplies start to run low during what is predicted to be a difficult winter.

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