Following up on a recent executive order signed by President Joe Biden, the OSTP reached out to the general public to identify the energy and climate implications related to digital assets.
The Office of Science and Technology Policy (OSTP), an Executive Office of the President of the United States, commenced a study to identify the scope for offsetting energy use and climate changes related to digital assets.
On March 9, United States President Joe Biden signed an executive order, directing various federal agencies to examine implications of digital assets on six key areas — consumer and investor protection, financial stability, financial inclusion, responsible innovation, the United States’ global financial leadership and combating illicit financial activity.
As a part of the initiative, the OSTP invited the general public and other stakeholders to share their viewpoints on various factors that contribute to the energy use and climate impacts of all types of digital assets and cryptocurrencies.
.@POTUS made clear that digital assets and cryptocurrencies must support our climate goals.
Today, @WHOSTP issued a Request for Information seeking YOUR input on the energy & climate implications of digital assets. Be sure to respond by 5pm ET on May 9. https://t.co/oRLqYHPG9l
— White House Office of Science & Technology Policy (@WHOSTP) March 25, 2022
President Biden’s executive order requires OSTP to submit a report on digital assets to identify factors that negatively or positively affect energy and climate concerns. According to the official notice:
“In particular, this Right for Information (RFI) seeks comments on the protocols, hardware, resources, economics, and other factors that shape the energy use and climate impacts of all types of digital assets.”
In addition, OSTP seeks public opinion on the potential benefits of digital assets in addressing the rising energy and climate concerns. According to the notice, the federal government will use the findings of the study to dictate future developments or industry trajectories related to digital assets.
The general public and organizations are invited to submit comments on or before 5:00 p.m. ET on May 9, 2022.
The U.S. Secretary of the Treasury Janet Yellen, who has historically shared anti-crypto sentiments, recently acknowledged the “significant role” played by cryptocurrencies:
“There are benefits from crypto, and we recognize that innovations in the payments system can be a healthy thing.”
I see a lot of strength in the American economy. We have an immensely strong job market, historically low unemployment numbers, and consumer spending continues to hold strong. I joined @SquawkCNBC this morning to discuss. pic.twitter.com/NKM1H8fDQC
The oil and gas giant launched the pilot program in January 2021 and is now reportedly considering expanding it to Nigeria, Argentina, Guyana, and Germany.
United States-based energy producer Exxon Mobil has reportedly been running a pilot program aimed at using the energy from excess gas to power crypto mining rigs — and it may be expanding its operations to four other countries.
In a Thursday report, Bloomberg said Exxon Mobil had inked a deal with Crusoe Energy to use excess gas from oil wells in North Dakota to run Bitcoin (BTC) miners. The project reportedly uses 18 million cubic feet of natural gas per month — roughly 0.4% of the oil giant’s reported operations in the state, producing 158 million cubic feet of natural gas each day.
The company launched the pilot program in January 2021 and is now reportedly considering expanding to Nigeria, Argentina, Guyana, and Germany in addition to launching a similar project in Alaska. Cointelegraph reported in February that oil and gas giant ConocoPhillips was running a program selling excess gas to third-party BTC miners for fuel.
Transporting natural gas requires pipelines which cannot always safely accommodate the amount produced. Companies are often forced to burn off any excess gas or vent it into the air, ultimately harming the environment and the firms’ profit margins.
“It is creating use of what would be otherwise wasted,” said Danielle Fugere, president of environmental shareholder advocacy group As You Sow, referring to the energy being diverted to Bitcoin miners.
According to a report from Argus Media, Crusoe Energy operated 60 data centers for crypto mining across four U.S. states as of September 2021 powered by “gas from the oil wells that would otherwise be flared on site.” Instead of burning off the gas, diverting it to crypto mining reportedly reduces carbon dioxide-equivalent emissions “by as much as 63%.”
3/ @CoinSharesCo estimates that 69 TWh of wasted power in the U.S. is lost annually to flaring
Though the Bakken shale basin in North Dakota is a major source of natural gas for the United States, Texas is also home to many oil and gas companies in addition to crypto mining firms seeing the potential for energy production in the state. In contrast, New York lawmakers have proposed suspending proof-of-work mining powered by fossil fuels in response to critics citing environmental concerns.
“Once crypto exchanges are compliant, the SEC’s primary reason for denying spot Bitcoin ETFs would no longer be valid, likely clearing the way for approval,” said the analysts.
Eric Balchunas and James Seyffart, exchange-traded fund analysts for Bloomberg, said that a proposed rule change with the United States Securities and Exchange Commission could be the catalyst for the regulatory body approving a spot Bitcoin ETF in mid-2023.
In a Thursday tweet, Balchunas said crypto platforms could fall under the SEC’s regulatory framework if the commission were to approve an amendment to change the definition of “exchange” proposed in January. The rule change would amend the Exchange Act to include platforms “that make available for trading any type of security” — seemingly including cryptocurrencies, making their investment vehicles more palatable for the regulator.
“Once crypto exchanges are compliant, the SEC’s primary reason for denying spot Bitcoin ETFs would no longer be valid, likely clearing the way for approval,” said the analysts.
Balchunas and Seyffart said under this amended definition of “exchanges”, which could be finalized between November 2022 and May 2023, the SEC could approve spot crypto ETFs including those with exposure to Bitcoin (BTC). The regulatory body has so far rejected all rule changes allowing listings of spot BTC ETFs on exchanges, despite approving some investment vehicles linked to Bitcoin futures in 2021.
New note out on why we think spot bitcoin ETFs will get approved in early Summer 2023. The SEC is proposing to expand the definition of “exchange” which would bring crypto platforms under SEC reg. After that (which could take a year) look for ETFs to get green light via @JSeyffpic.twitter.com/TtFgFXrJ8h
Many U.S. lawmakers and industry leaders have pushed back against the SEC’s seeming reticence to approve a spot Bitcoin ETF. In November, Representatives Tom Emmer and Darren Soto sent a letter to SEC chair Gary Gensler challenging the reasons the regulator has denied listing shares of a spot Bitcoin ETF. Bitfury CEO and former Acting Comptroller of the Currency Brian Brooks also said during a December hearing that the United States was “unquestionably” behind the curve on approving crypto ETFs.
The bill would direct federal agencies to scrutinize how El Salvador implements its Bitcoin law.
El Salvador president Nayib Bukele reacted to the news that the recently proposed Accountability for Cryptocurrency in El Salvador Act (ACES) had passed the U.S. Senate Foreign Relations Committee and will now head to a full Senate vote. The 40-year old national leader responded emotionally on Twitter:
Never in my wildest dreams would I have thought that the US Government would be afraid of what we are doing here. pic.twitter.com/QgJPa70mn0
On Wednesday, March 23, the Senate Foreign Relations Committee approved the bill, sponsored by Senators James Risch, Bill Cassidy, and Bob Menendez. The Committee granted a pass to S. 3666 (ACES) bill that is supposed to “mitigate risks related to El Salvador’s adoption of Bitcoin as legal tender”, and to S. 816, “legislation to recalibrate the State Department’s risk tolerance abroad”.
The ACES was first introduced on Feb. 16, 2022. In case securing the approval of the full Senate, it will require the federal government to assess the enactment of Bitcoin law in El Salvador and determine whether the nation can “mitigate the financial integrity and cyber security risks” and meet Financial Action Task Force (FATF) requirements. After 60 days of assessment, the agencies should come up with action plans.
Immediately after the introduction of the ACES in February, Bukele demanded that the U.S. “stay out” of El Salvador’s domestic affairs. “The US Government DOES NOT stand for freedom and that is a proven fact”, — Salvadoran leader claimed this time.
The date of the ACES vote in the U.S. Senate is yet to be determined.
Colorado is set to accept tax payments in crypto. To some experts, it’s only a matter of time before other U.S. states follow suit.
The governor of Colorado, Jared Polis, announced in February that the state government plans to allow residents to pay taxes in cryptocurrencies as early as the summer of 2022. To some experts, the move is both legitimizing for the crypto asset class and was expected to come in due time.
In an interview, Polis said crypto holders in Colorado could have the option of sending tax payments in digital currency, with the state converting the funds back into fiat as soon as the payments were received through an unnamed intermediary.
Colorado is already a leader in Crypto with our first in the nation Chief Blockchain Architect, hosting ETHDenver and other blockchain hackathons. It was great to sit down with CNBC to discuss the initiatives Colorado is taking on cryptocurrencies. pic.twitter.com/p5WtlF2E0r
Polis added that after the rollout this summer, the state could accept cryptocurrency payments for things “as simple as driver’s license or hunting license” within a few months. The governor said at the time he was “not at all” concerned about the potential volatility of cryptocurrencies like Bitcoin (BTC), given the state does not plan on holding the coins for long.
Shortly after taking office in 2019, Polis signed the Colorado Digital Token Act into law, aiming to exempt tokens with a “primarily consumptive purpose” from some securities regulations. The governor also said that State Senator Chris Hansen was working on a bill that would “allow state-created digital tokens to be utilized for state reserve purposes.”
Speaking to Cointelegraph, Senator Hansen said the bill “introduces extra security, saves on costs, diversifies the pool of investors, and the potential to lower interest rates paid by the state.” Hansen said:
“We need to ensure that every Coloradan can equitably participate in and benefit from investment in our state. By expanding beyond institutional investors and commercial banks, we invite millions of Coloradans to share in the financing of new capital assets.”
The senator stated that he is looking forward to seeing how the state will help “communities rebound from the pandemic, improve their quality of life, and address inequities that have kept everyday folks from fully prospering from our economy.”
Money as a representation of debt
Money was initially concocted as a physical representation of debt, according to anthropologists such as the late David Graeber. Governments, Graeber pointed out, utilized money to standardize the payment of tributary obligations and facilitate the maintenance of their workers.
Speaking to Cointelegraph, Brian Pasfield, chief technology officer at Fringe Finance — a decentralized lending platform — cited Graeber’s work to suggest cryptocurrency is being legitimized by moves like Colorado’s. Pasfield said:
“Seeing governments recognizing cryptocurrencies as a viable medium of payment for taxes speaks lengths about a mindset change in the way we view these currencies.”
Pasfield added that accepting crypto for tax payments will “inevitably lead to governments having to manage and hold these currencies within their Treasuries,” which can help reduce the volatility crypto assets are known for.
He added that if a large federal government like that in the United States were to finalize the regulation of cryptocurrencies, it would be a logical step for it to “accept [cryptocurrencies] as a legitimate form of one of the oldest social technologies: money.”
Russel Starr, CEO at DeFi Technologies — a technology company with products for investing in decentralized finance — told Cointelegraph he believes a government’s treasury should be denominated in the currency it uses to pay for services, meaning that if it’s going to pay employees in dollars, its crypto income should be converted to dollars.
However, Starr said that any entity should “have diversified investment holdings,” which should “absolutely include cryptocurrency and other decentralized financial products.”
Per the CEO, the “growth potential of cryptocurrency would make it an attractive asset in any carefully balanced portfolio, especially in that of the Mile High State.” This growth potential could also mean that governments accepting cryptocurrency for tax payments was a long time coming.
The bill proposed authorizing a state agency to “accept cryptocurrency as a method of payment for the provision of government services.” Back in 2018, Ohio became the first U.S. state to accept Bitcoin for taxes but dropped the crypto tax payment program in 2019, citing legal issues.
Colorado State Capitol building and surrounding grounds.
Jaideep Singh, co-founder and CEO of artificial intelligence tax engine firm FlyFin, told Cointelegraph cryptocurrencies are slowly getting regulated. Per Singh, crypto regulations started with reporting on crypto transactions for U.S. tax filers before government agencies shifted to tracking cryptocurrency transactions.
Tracking cryptocurrency transactions reduces their anonymity and “furthered a trend that we will see over the next several years” involving more transparency, tracking technology and increased regulatory requirements for crypto:
“It is the responsibility of governments to make sure that its citizens are not defrauded, criminal activity is curtailed, and that taxes are not being circumvented. So, this new development happening in Colorado was only a matter of time.”
Singh sees the U.S. leading the world when it comes to cryptocurrency acceptance, with other countries following, as “we will almost certainly see the adoption of blockchain and other cryptos by central banks.”
Ben Weiss, chief operating officer at Bitcoin ATM operator CoinFlip, told Cointelegraph he believes Colorado’s move will “likely create a chain reaction, with other states in the country following suit — especially if the rollout goes as planned.” To Weiss, this could be a “major step towards consumers recognizing crypto as a legitimate form of currency.”
Weiss added that the move could further boost cryptocurrency use cases among government services:
“This advancement may also encourage crypto transactions to be implemented in other places statewide, such as at a local DMV [department of motor vehicles]. This is a great opportunity for Colorado to build its reputation as a tech hub and mark its place on the forefront of a digital revolution.”
Weiss said that U.S. states could consider holding crypto assets because of their potential to appreciate, as the extra money gained through it can “be utilized to improve roads, clean parks, and help finance other underfunded areas of the local government.”
Speaking to Cointelegraph, Patrick White, co-founder and CEO of crypto asset tax and accounting software provider Bitwave, said he loves seeing states such as Colorado and California moving to accept crypto for taxes but “not for the reason one might think.”
White added that working with crypto assets requires “muscle memory; it requires understanding how to on-ramp and off-ramp, learning to do the tax and accounting, figuring out custodianship, and more.” He added:
“It’s a huge step for the industry that multiple states are having to really understand crypto, makes rules around pricing digital assets for real tax purposes, and more.”
Weiss hopes the U.S. federal government is next in line and that government bodies end up keeping “some of the assets on the balance sheet instead of just selling it right off.”
Even if governments do not keep crypto assets on their balance sheets, demand for cryptocurrencies that they accept as payment could surge. One way demand for fiat currencies is maintained is through their use in tax payments: People need to hold fiat so they can meet their tax obligations at the end of the month or year.
If cryptocurrencies are to be used to pay for taxes, the need to hold fiat currencies is greatly affected, even more so because paying for goods and services with crypto is becoming increasingly easier with the use of crypto debit cards.
Cowen initially announced plans to move into the crypto custody business in May 2021, entering a partnership with Standard Custody and Trust Company.
Cowen, a major American independent investment bank, has officially launched a dedicated cryptocurrency and digital asset division.
Called Cowen Digital, Cowen’s new business is designed to offer full-service trade execution and custody for cryptocurrencies like Bitcoin (BTC) and other digital assets for institutional investors, the firm announced on Wednesday.
In order to launch the new crypto division, Cowen has collaborated with PolySign’s cold storage-focused subsidiary, Standard Custody and Trust Company. The bank is also a client of Digital Prime Technologies, a brokerage solution-focused firm providing business and compliance services, the announcement notes.
Cowen initially announced plans to move into the crypto custody business in May 2021, entering a partnership with Standard Custody and Trust Company at the time. The company also invested $25 million in Standard’s parent company PolySign, which is co-founded by Ripple chief technology officer David Schwartz.
According to the announcement, Cowen has been working on building the infrastructure and systems necessary to launch Cowen Digital over the past 15 months.
Managing about $16 billion in assets as of late 2021, Cowen is a major investment bank in the United States. The company is committed to outperforming its clients by “staying at the forefront of innovation,” Cowen CEO Jeffrey M. Solomon said, adding:
“Through Cowen Digital, our clients now have access to the crypto and digital asset markets with our institutional quality and fully integrated end-to-end execution and custody capabilities.”
Future functionalities for Cowen Digital will also include derivatives and futures, financing solutions as well as institutional tools for managing decentrlized finance and nonfungible tokens, the announcement notes.
The news comes shortly after the American investment bank Goldman Sachs executed its first-ever over-the-counter crypto options trade in partnership with digital asset investment firm Galaxy Digital. Previously, JPMorgan Chase launched a virtual lounge in the Decentraland metaverse in February.
“Innovation is going to flow to where it can thrive the most, and actively trying to block it is going to encourage it to head elsewhere,” said Sheila Warren.
Sheila Warren, CEO of the Crypto Council for Innovation and former head of data, blockchain and digital assets at the World Economic Forum, said the digital yuan may present certain challenges for the United States. However, regulators and lawmakers may want consider how to encourage digital innovation, as China is already “massively tech forward” for its residents.
Speaking to Cointelegraph during Austin’s SXSW festival, Warren said that though she believed China’s digital yuan was unlikely to significantly affect retail payments in the United States, the adoption of the technology surrounding it could impact the dollar’s global dominance. The CCI CEO added that the Federal Reserve could make a “strong move” in preserving the dollar’s role by introducing a central bank digital currency with wholesale use cases. However, China’s rollout of the e-CNY might help set a standard for retail payments regardless of whether other countries adopt the digital currency.
“American exceptionalism is not something we can cling to anymore — not with the rise of what’s happening in Asia, Africa, and around the globe.” said Warren. “Innovation is going to flow to where it can thrive the most, and actively trying to block it is going to encourage it to head elsewhere.”
She added:
“These things are going to get built. The question is where do we want them to be geographically located and under what legal, regulatory, and sociocultural systems, which will prioritize certain kinds of applications and models over others.”
Sheila Warren (3rd from left) speaking at Financial Surveillance in a Cashless Society panel at SXSW 2022
Warren said that certain parts of the U.S. were embracing an innovation-friendly regulatory and business models, including Miami, Austin, and areas of Colorado. U.S. President Joe Biden’s recent executive order establishing a regulatory framework for cryptocurrencies could be a “massive driver” of jobs and innovation, according to the CCI CEO.
“We need every [U.S.] city to be embracing an innovation mindset,” said Warren. “That’s what’s happening in many parts of Asia, [where] every city is evaluating everything all the time.”
Warren explored central bank digital currencies and promoted the adoption of blockchain technology during her time at the World Economic Forum, leaving in February to become CEO of the Crypto Council for Innovation. The alliance of firms includes Coinbase, Gemini, Fidelity Digital Assets, Paradigm, Ribbit Capital, Andreessen Horowitz and Block.
