As Congress delves deeper into the world of cryptocurrency, a new wave of legislation is emerging that could radically shape the landscape of digital currency in the United States. Proponents argue that these measures will create much-needed regulatory frameworks; however, environmentalists warn that they may, in fact, exacerbate the already substantial energy demands and climate impacts associated with the industry.
This week, Republican leaders in the U.S. House of Representatives have designated “Crypto Week,” aiming to advance crucial bills related to cryptocurrency. Central to this agenda is the Guiding and Establishing National Innovation for U.S. Stablecoins Act, aptly shortened to GENIUS, which has garnered bipartisan backing.
Among its supporters are prominent figures like U.S. Senators Kirsten Gillibrand (D-N.Y.) and Cory Booker (D-N.J.). They’ve championed the GENIUS Act as essential for ensuring consumer protection and stabilizing financial markets. Having passed the Senate in June, it is now positioned for a House vote, potentially setting the stage for significant shifts in regulation.
Further fueling the dialogue around cryptocurrency legislation is former President Donald Trump, who announced via Truth Social that he successfully persuaded House GOP members to back the GENIUS Act. With his own ventures into the crypto world, including the creation of a $TRUMP meme coin and substantial crypto holdings, Trump’s influence adds an intriguing layer to the legislation’s support base.
Despite its favorable reception, the GENIUS Act faces scrutiny from both economic experts and environmental advocates. While some economists predict that the bill may lead to unintended consequences, including economic instability, environmentalists express deep concern over the potential escalation of an already destructive industry.
Mandy DeRoche, deputy managing attorney for Earthjustice’s clean energy program, articulates the dilemma succinctly: “The more that cryptocurrency is legitimized and utilized, the more crypto mining there will be.”
At the heart of the issue is cryptocurrency mining, a process essential for validating transactions and creating new coins, most notably Bitcoin. This operation requires immense computational power, with miners running constant calculations in a ceaseless quest to unlock transaction codes. In 2022 alone, cryptocurrency mining accounted for approximately 2.3 percent of all U.S. electricity consumption, according to the Energy Information Administration.
Communities often bear the brunt of mining operations, with many located in small towns or rural areas that are unprepared for the influx of energy demands. Jackie Sawicky from the National Coalition Against Cryptomining points out that these billion-dollar corporations often “bully” local communities, operating with minimal oversight.
There are additional environmental concerns: mounting complaints about excessive water use and noise pollution emanating from massive mining setups, particularly in Texas—now the leading state for Bitcoin mining—illustrate the growing discord between local residents and these operations.
A critical alternative to traditional mining exists in the form of proof-of-stake, a method that minimizes environmental impacts by employing validators—individuals with a significant stake in a cryptocurrency—to confirm transactions. Ethereum, the second-largest cryptocurrency, transitioned to this model in 2022, resulting in a staggering 99.99 percent reduction in energy consumption.
Yet, the GENIUS Act does not stipulate any specific requirements for how new stablecoins are verified. Stablecoins are intended to offer price stability by being pegged to other assets, like the U.S. dollar, and can be generated through either mining or proof-of-stake methods. This omission has drawn criticism, as it allows for the continuation of mining practices that are detrimental to the environment.
Environmental advocates stress that expanding the cryptocurrency industry through stablecoin initiatives without addressing the underlying energy concerns will inevitably lead to increased mining—and consequently, greater environmental harm. Amanda Wick, CEO of the Association for Women in Cryptocurrency, emphasizes that the majority of stablecoins are currently produced through mining techniques.
Conversely, researchers like Adi Wolfson have highlighted the viability of producing stablecoins through proof-of-stake mechanisms, which promise to deliver “less energy, less pollution, [and] less carbon.” Wolfson underscores that stakeholders have the choice to adopt sustainable practices, presenting a potential path forward for the industry.
