Could Bitcoin mining become illegal?

If 2021 was the year of glory for cryptocurrencies, the beginning of 2022 sees the clouds pile up. First, most currencies have seen their prices plunge, with Bitcoin going as far as falling below the $40,000 mark. At the same time, the mining activity of currencies at ” proof of work is threatened with banishment in various parts of the globe. Recall that in the system of proof of work initiated by Bitcoin, several miners perform calculations in parallel in order to solve a complex mathematical problem. The first to produce the correct result is rewarded in bitcoins. However, this activity has often been accused of being excessively consuming in energy, an assertion that the bitcoin supporters regularly strive to challenge.

Russia in favor of banning Bitcoin mining

The Bank of Russia has just published a report calling for a total ban on cryptocurrencies, this time including the mining of Bitcoin and other currencies using a “proof of work” system. The reason given: the repercussions on the environment. However, Russia contributes 10% of the computing power of the Bitcoin network. No one yet knows what follow-up President Putin could make to this recommendation.

Countries that have banned cryptocurrency

What is certain is that at the global level, there is a notable trend. Already, if we believe a report published by the US Library of Congress, nine countries have taken positions aimed at completely ban the use as the production of cryptocurrencies: China but also Algeria, Bangladesh, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia. The same Congress report also identifies 42 countries in which such a ban would be implicit such as Bahrain or Benin.

the Bitcoin Mining Map from the University of Cambridge tempers such a figure: the nine countries in question represent only 0.19% of the total electrical power consumed by Bitcoin.

In fact, until May 2021, China largely dominated the mining activity of this currency. Then, the mining companies were asked to leave the ground. The USA has been the first beneficiaries of the exodus that followed: after a few months, they became the No. 1 in mining.

The doubts of the American senator

However, even in the USA, the situation could deteriorate. Sam Bankman-Fried, the founder of the FTX exchange thought fit to share his worries concerning the current attitude of several American institutions and legislators. The SEC (US Securities and Exchange Commission) has hinted that it will strengthen its supervision of exchanges (trading platforms). Last December, the Biden administration had made it known that it was going to strengthen its control of the crypto domain. And on December 2, Democratic Senator Elisabeth Warren raised concerns about power consumption bitcoin which, she says, has more than tripled since 2019, reaching the equivalent of the electricity consumption of a state such as Washington.

A Swede on a crusade against mining

However, Europe is not left out. Last Wednesday, Erik Thedéen, director of the financial authorities in Sweden, explained to the FinancialTimes that mining had become a major problem for the countries of Northern Europe. And the solution he suggested is radical: Banning proof-of-work mining – and therefore in particular the mining of the main currency of the domain, which is Bitcoin. However, the same Thedéen is the vice-president of Esma – the European Securities and Markets Authority – and his position could influence the directives at the continental level.

Bitcoin proponents keep repeating, with figures and graphs in support, that the power consumption of mining is good greener than it would seem for two main reasons:

• mining companies are bent on exploiting surplus electricity consumption that would otherwise be wasted;
• more and more, the energies used for mining, especially in Texas, are renewable.

However, it seems that the message is still struggling and therefore, the mining activity of Bitcoin and other “proof of work” currencies such as Litecoin, sees many dark clouds on its horizon.