The increasing importance of emerging digital assets has created a multifaceted environmental challenge and opportunity. This paper explores one form of emerging digital asset, cryptocurrency (crypto), and the causal factors that drive its environmental impact. While cryptocurrency makes up a relatively small proportion of overall global electricity consumption (0.6 percent) and carbon dioxide equivalent emissions (0.2 percent), the electricity demand associated with its mining operations is growing rapidly. Its emissions profile surpasses that of traditional banking by a wide margin and, when compared on a climate damages per unit price basis, also exceeds that of gold mining by an order of magnitude. A scenario analysis reveals that cryptocurrency is set on an unsustainable path. The paper concludes with recommendations that include efforts to improve cryptocurrency’s environmental performance and enable migration toward greater adoption of efficient algorithmic approaches; increased transparency of cryptocurrency mining operations through monitoring and reporting frameworks to promote grid stability and decarbonization; and investment that prioritizes the use of cryptocurrency for everyone’s benefit.
