The new data from regtech CUBE reveal that, despite the increased regulatory focus on cryptocurrencies, discussions around digital assets and sustainability account for less than 0.1% of regulatory issuances in 2022 so far.
Although regulators global organizations advocate for a greener financial system and actively work so that altcoins be under his wing, negative environmental effects of cryptocurrency mining have clearly been overlooked.
The same is true for large financial investment banks who, touting ESG credentials, are simultaneously opening up their suite of products to crypto. The traditional financial mainstream poses difficult questions for sustainability, especially for Bitcoin Y ethereum. For example, the model of proof of work (PoW) used by most major cryptocurrencies It consumes a lot of energy and will have long-term negative impacts on the environment.
Yet despite the mutual exclusivity between the two titans of the modern financial world, it is well known that companies that do not prioritize digital assets and ESG now may not be relevant in years to come.
Therefore, now is a critical time for regulators to work together and consider the impact that regulation could have in creating a truly sustainable future for both on a global scale. Without further focus and regulatory issuance in this space, companies with cryptocurrency offerings will lack guidance on steps they need to take to curb environmental risks associated with digital assets, and also few incentives.
Ben Richmond, CEO of CUBE Global comments that as traditional financial services and society welcome cryptocurrencies into the mainstream, regulators are moving quickly to create new regulations or expand existing parameters to protect consumers and the broader economy.
“However, it is clear from the data that the issue of sustainability within cryptocurrencies has been overlooked. To resolve the conflict between cryptocurrencies and climate risk, global regulators will need to push regulation to ensure that both can thrive without undermining the other. There are already aspects of ESG and crypto working together, socially, it supports the unbanked, giving people without accounts access to digital wallets that can break the cycle of financial exclusion. Despite this, not addressing the environmental impacts will lead to an inevitable clash of two titans that could significantly set back the trajectory of the modern financial world“, he adds.
Then he concludes: “Almost as important is that this approach must be addressed on a global scale. If left to develop in a localized fashion, VASPs and compliance teams will not only be faced with a complex sustainability issue, but will more generally be faced with an isolated regulatory web across multiple jurisdictions that will atrophy rather than inspire innovation”.
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