Cryptocurrency Heading Towards A Greener Future
The cryptocurrency ecosystem is shifting towards a cleaner, greener future.
Most energy used to mine crypto already comes from renewable sources. Rather than harm the planet, crypto and blockchain can actually be a force for environmental good.
The debate around bitcoin and its carbon footprint has focused on the energy they consume, BlockchainNZ chair Bryan Ventura says.
Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded for goods or services that the company provides.
Companies are also creating new financial products and services using blockchain technology, or decentralised finance. There are also new forms of virtual assets being created, using non-fungible tokens. Cryptocurrencies, decentralised finance and virtual assets work using a technology called blockchain.
“Cryptocurrency adoption has soared during the covid pandemic, as private investors, public companies and underbanked individuals realised the benefits of digital currencies.
“Regulators have struggled to keep up with this growth and may limit financial inclusion by applying rules to crypto markets that are not fit for purpose.
“By looking to past eras of innovation, regulators can work collaboratively to adapt rules and policies to support open competition and rapid innovation in the cryptocurrency sector.
“But bitcoin does consume resources. As with every other energy-consuming industry, it’s up to the crypto community to acknowledge and address these environmental concerns.
“Governments around the world are looking to increase the regulation of cryptocurrencies and virtual assets, which may extend to decentralised finance, non-fungible tokens and potentially other concepts using blockchain technology. There is a risk that Aotearoa New Zealand may follow suit.
“In doing so it may unintentionally hinder our virtual asset industry. Regulation and compliance are also relevant to New Zealand’s virtual asset business access to bank accounts.”
BlockchainNZ, which is part of the NZTech Alliance, can help government understand the basics, starting at how bitcoin/blockchain works through to smart contracts, security tokens and decentralised autonomous organisations.
Parliament’s finance and expenditure select committee is poring over 260 submissions into an inquiry into the nature, impact and risk of cryptocurrencies. Submissions closed earlier this month.
Cryptocurrencies are an emerging source of innovation that promises to democratise financial markets. Some cryptocurrencies have the potential to provide a better a store of wealth than official currencies.
The Reserve Bank says in its submission that products such as bitcoin claimed to be an alternative form of money but were little used as a form of payment.
However, BlockchainNZ told the select committee that the combined value of cryptocurrencies stood at almost $3 trillion in August and that most activities involving cryptocurrencies in New Zealand are captured under existing laws.
Dozens of individuals and companies involved in the crypto-currency industry made submissions in favour of cryptocurrencies.
BlockchainNZ’s submission encourages the government to work with the local New Zealand industry to shape standards for virtual asset services providers (VASPs), firms that manage cryptocurrencies for people, covering providing education about the risks and how cryptocurrencies should be managed by these trusted third parties.
“It is important to balance the mitigation of risks associated with cryptocurrencies and VASPs, against the importance of preserving a legal and regulatory environment which does not unduly stifle New Zealand innovation and prevent willingly compliant enterprises from operating.
“Achieving this balance would have positive flow on effects on the wider economy, such as growth in the New Zealand tax base and employment, consumer protection and an overall reduction in money laundering and terrorism financing risk.”