Rapid growth in crypto mining may disrupt energy markets: Fitch

By Ovunc Kutlu

ANKARA (AA) - Rapid growth in cryptocurrency mining may disrupt energy markets and divert electricity from other sectors, particularly in emerging countries, Fitch Ratings said in a report on Monday.

As the global demand for cryptocurrencies and mining increased last year, their ecosystems consumed an estimated 0.4%–1% of global electricity, the rating agency said.

Electricity represents up to 90% of crypto mining costs, while most farms are often located at low-cost places, especially where electricity prices are subsidized, it added.

New farms in some locations witnessed overload in energy networks and supply outages, after China banned crypto trading and mining last year and miners relocated to Russia, Kazakhstan, Canada and the US, it noted.

While Bitcoin's energy needs have increased with its rising popularity and wider acceptance, its power demand alone is estimated at 125 terawatt-hours per year, according to Fitch.

"Unchecked growth of unregulated cryptocurrencies’ energy demand may disrupt the power sector, as the lack of transparency challenges investment planning in energy generation and networks," the report said.

Fitch noted that government regulators are increasing their focus on cryptocurrencies, for their impact on financial markets, use in illicit activities, relation to energy markets and the resulting environmental implications.

It also underlined that Europe has called to ban the most energy-intensive method of "proof-of-work" crypto mining, and it is moving towards less energy-intensive "proof-of-stake" mining.

The agency said other measures may include registration of mining centers, locating them close to abundant renewable energy sources, and require miners to decrease their electricity use during peak hours.