Bitcoin, the world’s largest cryptocurrency, has a well-established history of negative environmental impact, and this reputation has carried broadly across the crypto space. Beginning last year, one portion of the cryptosphere has started pushing back and working to self-regulate the carbon footprint for the industry with the creation of the Crypto Climate Accord, reports the Financial Times.
The CCA was created by a coalition of 200 various crypto entities that partnered with the Rocky Mountain Institute, an environmental lobby based out of Colorado. The coalition has all signed on to cut carbon emissions generated from electricity usage to net zero by 2030.
The signatories of the CCA plan to reach this goal through carbon offsets, by converting blockchain technology's energy sources to renewables by 2025, and by using green hashtags to track energy usage. This follows a general shift towards renewables with the ban of anything crypto by China last summer; China had previously been the world’s biggest bitcoin miner and relied on coal-driven electricity, thereby creating a large carbon footprint.
When bitcoin miners left China in search of other countries to set up shop in, many did so by setting up their mining rigs using renewable energy sources. The industry is very aware of the scrutiny it is under regarding its carbon emissions and is largely working to reduce that.
New digital assets that have recently come to market are doing so utilizing a “proof of stake” verification method for transactions that relies on existing cryptocurrencies that users already have. It’s a drastically more energy-efficient model than the “proof of work” model that bitcoin uses, which requires enormous computing power and draws on much more electricity.
Could Crypto Convert? CCA Thinks So
The coalition has taken a giant step by releasing a 32-page template that gives guidance on how to conduct viable environmental crypto audits that would be accepted by a traditional pension fund. It’s a big move and a first for the industry, but it remains to be seen how many crypto companies will sign on.
The move to be more energy-efficient is a major trend that major crypto asset management firm Valkyrie Investments is watching this year. Valkyrie is looking at “the concerns over sustainability and meeting ESG criteria,” said Leah Wald, CEO of Valkyrie Investments, on the ETFs 2022 webcast hosted by ETF Trends and Investopedia. “We’ll see that emerging class of publicly traded bitcoin miners also increasingly relying on renewable energy sources.”
Valkyrie describes itself as being at the intersection of the traditional finance world and the new crypto sector with its variety of digital assets. The firm currently offers two ETFs for investors looking for different kinds of crypto exposure, the Valkyrie Bitcoin Strategy ETF (BTF), which invests mostly in bitcoin futures contracts, and the Valkyrie Balance Sheet Opportunities ETF (VBB), which invests in public companies that carry exposure to bitcoin. The firm also offers various spot exposure funds.
Both funds are actively managed, with BTF carrying an expense ratio of 0.95% and VBB carrying an expense ratio of 0.75%.
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