Crypto's ESG problem

Even mainstream financial institutions are dabbling in the multi-trillion dollar cryptocurrency market. Yet behind the blockchain boom are worrying environmental and social impacts - along with serious considerations for firms to confront. Tom Vidovic reports on the 'digital dilemma'.

Tom Vidovic (tomvidovicuk@gmail.com) is senior financial crime manager and nominated officer for Ghana International Bank (London).

In April 2023, a report by the Cambridge Centre for Alternative Finance made headlines, revealing that Bitcoin's annual energy consumption surpassed that of Norway, casting a stark light on the environmental impact of cryptocurrency mining. [1] Cryptocurrencies like Bitcoin have transformed the way we think about financial transactions and currency. These currencies operate on a decentralised network of computers, each involved in 'mining' - a process where computers solve complex mathematical problems to validate transactions and, in turn, generate new cryptocurrency units. However, the rising energy demands of this process pose a significant challenge, particularly for financial services firms committed to Environmental, Social and Governance (ESG) criteria, which have become central to decision-making in the industry.