The Banking Executive Magazine - November 2022 Issue

Cryptocurrency • Knowledge building and innova- tion: For improved analytical capa- bilities that can enhance the accuracy of electricity usage esti- mates and sustainability, authori- ties should set research and development priorities that im- prove the environmental sustain- ability of digital assets, including crypto-asset impact modeling, as- sessment of environmental justice impacts, and understanding bene- ficial uses for grid management and environmental mitigation. Re- search and development priorities should emphasize innovations in next-generation digital asset tech- nologies that advance security, pri- vacy, equity, resilience, and climate goals. TOWARDS CRYPTOCURRENCY FOR A SUSTAINABLE WORLD Climate change is one of the most pressing problems in the world. Var- ious countries are addressing it in their legislations and policies. Vari- ous efforts are undertaken at COP27 for protecting communities from pol- lution, reducing greenhouse gas emissions, achieving a carbon pollu- tion-free electricity grid, and reach- ing net-zero greenhouse gas emis- sions. To achieve these ambitious goals, emerging technologies should con- tribute to a net-zero, clean energy fu- ture. The use of digital assets, such as crypto currencies, which are based on distributed ledger technology (DLT), is expanding. As an emerging technological innovation, digital as- sets have provided some benefits and value for businesses across the globe and have the potential for future ben- efits with emerging uses. Cryptocurrencies, which are digital assets that are implemented using cryptographic techniques, can re- quire considerable amounts of elec- tricity usage, which can result in greenhouse gas emissions, as well as additional pollution, noise, and other local impacts to communities living near mining facilities. Depending on the energy intensity of the technol- ogy and the sources of electricity used, the rapid growth of cryptocur- rencies could potentially hinder broader efforts to achieve COP27 cli- mate commitments to reach net-zero carbon pollution. There are various solutions to this problem. Arab countries and author- ities should intensify research and development in areas related to the following proposed solutions: Solution #1: producing cryptocurrency in a less energy-intensive way Popular cryptocurrency, such are Ethereum, announced lately a big change in crypto currency produc- tion that can help in cutting electric- ity use by 99 percent. Bitcoin should make a similar move as well. Solution #2: Using distributed ledger technolo- gies (DLT) for climate monitoring or mitigation DLT may have a role to play in en- hancing market infrastructure for a range of environmental markets like carbon credit markets. Responsible development of this technology would encourage innovation in DLT applications while reducing energy intensity and minimizing environ- mental damages. Solution #3: Devising policies and strategies for responsible development and trad- ing of cryptocurrencies In line with the policies proposed by the White House in the United States, Arab countries and authorities should work together to put strategies and policies towards responsible de- velopment and trading of cryptocur- rencies. These policies and strategies should address issues such as mini- mizing greenhouse gas emissions and environmental impacts, ensuring energy reliability, putting energy effi- ciency standards. Solution #4: Establishing cryptocurrencies data centres The cryptocurrencies data centres will collect and analyse information about crypto-assets to enhance effi- ciency and transparency. Solution #5: Research and innovation Arab countries should support re- search and innovation in next-gener- ation digital currencies and technologies. Solution #6: Developing carbon credit markets The concept of carbon credit market is new and various research should be undertaken to explore the poten- tial benefit and risks of these markets and their future prospect. REFERENCES COP27, FUTURE INVESTMENT INI- TIATIVE, The Guardian, Coinbase, Cambridge University, World Eco- nomic Forum, ASIA NIKKEI, CNBC, White House Fact Sheet (Climate and Energy Implications of Crypto- Assets in the United States), UNDP, Smithsonian Magazine. the BANKING EXECUTIVE 36 ISSUE 167 NOVEMBER 2022