Bitcoin uses as much energy as Switzerland. According to a 2015 UK study, cryptocurrencies enable tax evasion and money laundering. The brief history includes massive theft from the largest exchange leading to its bankruptcy in 2014, founders ‘pre-mining’ fortunes for themselves while using deceptive advertising, and various cases of theft, extortion, money laundering and obstruction of justice (including crimes committed by federal officers tasked with preventing fraud), not to mention the massive drug financing and other illegal networks.
Smart people, like Krugman and Buffett, agree that unregulated, largely criminal financial bubbles generally end poorly, especially for true believers. Black market currencies also destabilize real currencies, by hiding data on economic activity which would otherwise be used to control exchange rates and monetary policy. And, by the way, the IRS mandates that you report bitcoin capital gains on your US tax return.
But the most urgent reason to stop these Ponzi scheme “currencies”, is the energy use. In 2019, Bitcoin’s energy use matched Switzerland, but in 2018 it was just passing Jordan after Panama in 2017. In other words, the rate of growth in energy consumption is huge. Why? Because of the computing power needed to handle the cryptographically hidden ‘coins’, from ‘mining’ to decentralized massively redundant storage to verifying transactions often anonymously through black markets. So the real energy use of crypto-currencies last year was likely much higher than Switzerland and will be even higher this year. The Arctic is already melting fast enough without adding more servers to mine more billions for criminals.
Sure, banks, exchanges and credit card companies also use a lot of energy, but they have a relatively few, efficient large servers to handle transactions. They don’t have to power millions of secret basement mining operations or maintain a hidden labyrinth of black market owners and transactions. Real financial institutions are regulated, meaning that they pay taxes, report taxable events and report criminal activity. They may not always follow the rules or be very popular, but it’s better to let governments and legally-accountable financial firms handle our money than fraudsters, drug lords and other money launderers.
The problem is that it’s easier to invent a shiny new alt-coin, blockchain mod, or non-fungible token and advertise it, than it is to keep track of them legally. Last week someone may buy a billionaire’s first tweet for charity, but next week someone could be funding crime through a fraud, or a billionaire could be evading taxes. Only when the black market makes a transaction with the regulated market, can these new ‘currencies’ be tracked reliably by regulators.
So, we need the old folks in our government to pass legislation taxing any crypto-currency transactions that can be tracked. Punitively. And use the funds to pay for climate change mitigation. Sure, I can think of a few of the wealthiest people on the planet who will be upset, and that makes me happy.