Bitcoin miners are lobbying the Environmental Protection Agency not to crack down on their operations amid pressure by Democratic lawmakers to address the industry’s carbon emissions and electronic waste.
It’s the latest overhang for Bitcoin mining stocks. Companies such as
Marathon Digital Holdings (ticker: MARA),
Riot Blockchain (RIOT), and
Core Scientific (CORZ) have all slid around 50% this year as the cryptocurrency remains deeply depressed.
Democrats in Congress signed a letter to the EPA on April 20, urging the agency to evaluate mining facilities for compliance with the Clean Air Act and Clean Water Act, and to investigate miners for “any harm” they may be causing to local communities from their electronic waste and noise pollution.
“We have serious concerns regarding reports that cryptocurrency facilities across the country are polluting communities and are having an outsize contribution to greenhouse gas emissions,” said Rep. Jared Huffman (D-Calif.) in the letter. “As cryptocurrency continues to gain popularity and demand more mining, we must ensure communities are not left with the toxic burdens associated with this technology.”
Nearly two dozen Democratic House lawmakers signed the letter.
The Bitcoin Mining Council, a crypto industry trade group, fought back with its own letter to the EPA on Monday. A roster of industry heavyweights signed the letter, including
MicroStrategy (MSTR) CEO Michael Saylor,
Block (SQ) “Head” Jack Dorsey, and investment firms such as Fidelity, SkyBridge Capital, and Fortress Investment Group.
Bitcoin mining, the group said, is no different than datacenters owned by tech giants like
Meta Platforms (META), Google parent
Alphabet (GOOGL), and
“All datacenters utilize electricity generated externally,” the Council said. “Digital asset miners simply purchase electricity from the grid, the same as
Microsoftand other datacenter operators.”
Bitcoin mining is the process by which dedicated computers, known as ASICs, try to guess an alphanumeric string of characters to validate a block of transactions, earning a Bitcoin if they guess correctly. The process is called “proof of work,’ or POW, and miners consume huge quantities of electricity to compete—equivalent, in aggregate, to the annual energy consumption of countries like Greece or Poland, according to the Cambridge Bitcoin Electricity Consumption Index.
POW isn’t the only way to validate transactions on a blockchain. A newer system, called “proof of stake,” or POS, uses a mechanism of putting up tokens as collateral for the rights to authenticate transactions. POS uses far less energy than POW and has other benefits—reasons why the Ethereum network aims to transition to POS from POW later this year.
Democrats in Congress point out that POS is 99.9% more energy efficient than Bitcoin’s POW system. They also argue that Bitcoin miners produce huge quantities of electronic waste—30,700 tons a year of it—because ASICs must continually be upgraded to remain competitive.
The Bitcoin Mining Council says those claims are deeply flawed. Miners don’t actually produce carbon emissions, they argue, saying their electricity comes from the same sources as traditional datacenters. The miners claim that 58% of the global network’s electricity comes from renewable sources, well above the 21% sustainable mix in the U.S. And they are making progress in cutting the industry’s carbon footprint.
The miners also argue that electronic waste is far lower than Democrats claim, based on their own industry depreciation figures, rather than the academic study cited by Democratic lawmakers. And the miners claim that it’s misleading to compare the energy consumption of POW with POS. Blockchains using POW are far more secure and decentralized, they argue, while POS blockchains transform the networks into “pure plutocracies,” controlled by a handful of large entities.
The EPA didn’t immediately respond to a request for comment.
Environmental pressures are only the latest trouble for mining companies. The stocks have been slammed as the price of Bitcoin remain well below its 2021 peak near $69,000, recently trading around $39,000.
Miners are also spending heavily on new equipment and plant expansions, even as the cost of capital rises with higher interest rates. And the network’s hash rate—a measure of difficulty—has soared, increasing the electricity required to mine each coin and affecting profit margins for miners.
Most miners can still turn a profit with operating costs below $20,000 per coin. But investors may need more convincing that their business models are sustainable and won’t require constant capital outlays to maintain profitability.
A bounce in the price of Bitcoin would certainly help. A crackdown by the EPA would not.
Write to Daren Fonda at email@example.com