There’s much that goes into determining whether an investment is worthwhile for the future. Companies and individuals are increasingly using ESG criteria to weigh up the value of a potential investment. Indeed, ESG is experiencing a boom in popularity at the moment. Using those metrics, companies can ensure that they will experience growth and sustainable growth.
The popularity of ESG coincides with the popularity of Bitcoin and other cryptocurrencies. There’s a lot of potential for overlap between these two interests, but it’s not something that too many people who have a foot in the digital asset camp have given too much thought towards. In this blog, we’re going to take a closer look at ESG and digital assets, including why they need to align, the importance of clean digital assets, and the concerns surrounding crypto and ESG.
Why Sustainability and digital assets need to be compatible
People rightly believe that crypto is the future. However, how big a presence it is in the future depends on various factors. In order to become widespread, it’ll have to align with ESG concerns. The main priority for governments, organizations and the population at large is the environmental challenges that we face in the future. In a quest to become carbon-neutral, future processes, technology, and operations will have to be environmentally friendly.
On the ESG scorecard, cryptocurrencies such as Bitcoin and Ethereum clearly do very well on the ‘S’ and ‘G’ — social and governance — side of things. But there are doubts as to how well they perform on the ‘E’ part. We’ll discuss that in greater detail later on. In any case, there’s no avoiding the fact that it is the future. The world is moving away from energy-intensive, damaging processes and towards sustainability.
The importance and significance of ‘clean’ digital assets
In an era of uncertainty, a crypto product that ticks all of the ESG boxes is becoming an increasingly valuable asset. That’s in large part because crypto products are increasingly under the microscope. For the first time, regulators are looking at the broader impacts of cryptocurrencies to determine their impact at an environmental, social, and governance level. As such, it’ll be the cleanest products that are able to avoid regulatory issues.
Growing ESG Concern in Crypto
There are plenty of unanswered questions surrounding Bitcoin and other cryptocurrencies. We’re still in the waiting stage, even if the signs are positive. One big issue that the crypto community will need to find a solution to is how well those systems can operate in line with environmental sustainability. Of all the sticks used to beat Bitcoin, no arguments are touted quite as much as the amount of energy that it uses.
There are reasons to be hopeful, however. For one, it’s possible that people have overstated how much energy blockchain technology uses in the first place. Studies have shown that it’s likely to be half the amount of the energy used to mine gold, for instance, and a fifth of the energy that the traditional banking system uses. Plus, somewhere in the region of 30 – 70% of the energy used to mine Bitcoin comes from renewable sources. So, there are reasons to think that the environmental issue will one day be put to bed.
But there’s likely a long way to go before that happens. It wasn’t so long ago that Elon Musk announced that Bitcoin would no longer be an accepted form of payment at Tesla due to environmental concerns. It’s also possible that other cryptocurrencies figure out a way to make their operations less energy-intensive. Bitcoin can’t really do that; the complexity of its operations is its main strength, but it does require a lot of energy.
It’s not only the environmental concerns that are causing some hesitation in the crypto community. The social impact of Bitcoin and others is always being debated by governments around the world. This is due to crypto’s assumed connection to criminal activity. Due to this, it’s possible that governments try to regulate the market in some way, perhaps by viewing it not as a currency but as a tradable asset.
Mawson’s Approach to ESG
Here at Mawson, we’re committed to ensuring that we reach our ESG goals. We’ve joined the Bitcoin Council, a voluntary organization that promotes a commitment to the core principles of cryptocurrency and also formed a partnership with Quinbrook Infrastructure Partners. Always moving forward with our ESG goals, we’re joining the mission to make Bitcoin as green as possible.
