Russia reels. EU pauses. China bans. Ukraine flips.
As the Russian economy reels from the growing list of financial sanctions including cancellation of access to the international SWIFT payments system effectively freezing Russian government assets overseas and cancellation of the Russia to Germany Nord Stream 2 gas pipeline. Many are wondering how their economy will survive their illegal invasion of Ukraine and whether the freezing of Russian capital will cause Russian Banks to seek crypto assets accessible outside of foreign sanctions.
Perhaps anticipating such a move and only one day after Russia’s invasion of Ukraine, the European Union attempted on Feb 25th to vote on its Mica blockchain regulation framework. A vote that was quickly deferred indefinitely after public backlash followed leaks of the document that revealed plans to ban “Proof of Work” cryptocurrencies such as Bitcoin and Ethereum because of their energy use.
Closer investigation reveals that little actual Bitcoin mining is presently occurring in the EU, except for Germany, because electricity prices are generally not low enough to make Proof of Work mining economical.
So why argue for a ban? According to Indra Overland from the Norwegian Institute International Affairs, at issue are lingering concerns about how Bitcoin mining might compete for scarce renewable power resources in the EU.
Even if cryptocurrencies use renewable energy where it is abundant, they are competing against other users who could also be attracted to those pockets of cheap renewables — Indra Overland
An alternative view advocated by the Bitcoin Clean Energy Initiative suggests that the historic under-investment in renewable energy infrastructure around the world could be boosted by the Bitcoin mining sector whom have a clear, commercial need to facilitate the creation of renewable & cheap power assets.
Bitcoin mining could encourage investment in solar systems
(solar grids + batteries), enabling renewables to generate a higher
percentage of grid power — Ark Invest
While it is not clear exactly how such additional “bitcoin miner developed” renewable energy would be shared between miners and the public, it is clear that the size of investment being made into renewable power generation by Bitcoin miners globally is likely to spur improvements in renewable energy technology that will benefit miners, governments and the community.
Whilst the EU continues to debate its crypto regulatory approach, China is aggressively rolling out their own Central Bank digital currency (CBDC), a digital yuan, that is showing strong levels of use. Success, at a time when many other jurisdictions, including the US, are still developing their regulatory approach. What is causing the hold-up in crypto policy regulation around the world?
At odds is the challenge of “domestic currency diversification” associated with fully opening the door to cryptocurrency versus the potential negative “economic isolation” that could occur for economies who decide to keep the crypto door fully closed.
A nuanced choice that is challenging governments around the world who want to be part of what blockchain has to offer and yet also, who do not want to dilute their ability to manage their own financial affairs.
China, highly sensitive to currency controls and perhaps appalled at the recent use of crypto to bolster fundraising for anti-vax truckers against the Canadian government, have just released new guidelines outlawing the use of crypto as a fundraising tool that includes jail penalties.
If we look more closely at what happened in Canada, we find that the recalcitrant truckers
were first using a range of conventional crowdfunding means to support their cause like go fund me before they turned to crypto fundraising.
Frustrated and low on options, the Canadian government were eventually forced to invoke Emergency powers to freeze the truckers’ bank accounts. Powers, they have since rescinded now that the truckie-caused crisis to Canadian economy has been averted.
Returning to China, the success of their CBDC, that uses blockchain technology, is in contrast to their decision to ban other forms of crypto indicating their lack of appetite for having a diversified basket of digital currencies active in the Chinese domestic economy, in addition to the Yuan.
Diversification, that has been a lifesaver for the NGO’s of Ukraine, faced with a war-induced humanitarian disaster and spotty access to bank funds due to a run on deposits, pivoted to accept cryptocurrency donations and found millions pouring in from all over the world.
Developments, that no doubt contributed to a spectacular about-face from the Ukraine government who at first said that they can’t accept Bitcoin donations.
No we cant
National legislation does not allow the Ministry of Defense of Ukraine to use other payment systems (“Webmoney,” “Bitcoin,” “PayPal,” etc.) — Ukraine Ministry of Defense
Only for them to tweet, less than 48 hours later, acceptance of crypto deposits directly from the public via a specially created Ukraine Government crypto wallet.
Yes we can
At the time of writing, the wallet had collected more than $5 million dollars in crypto from well-wishers around the world with every transaction publicly visible and verifiable via the wallet’s blockchain record.