on the crypto
The New York State financial regulator has urged companies to pay more attention to the financial risks associated with climate change.
Look at the damage of climate change
In a letter sent to all regulated firms last week, the New York Department of Financial Services (NYDFS) said it expects companies, including virtual currency assets, to begin examining these risks and developing possible approaches to mitigate them. .
The letter follows guidelines similar to those issued by the NYDFS for state insurance companies in September. Noting that every one-degree-centigrade increase in global temperatures leads to damage equal to 1,2% of the U.S. Gross Domestic Product (GDP), the letter says that reducing economic output in communities hardest hit by climate change could also lead to increased default rates, reduced lending activity, impaired assets and losses. He added that the flood risk could have an impact on regional and community banks in particular.
Energy costs for cryptocurrency mining
Turning to virtual currency businesses, the letter states that studies suggest that the environmental impact of mining cryptocurrencies such as bitcoin can be substantial, while trading on Bitcoin Pro it is irrelevant. "The energy cost of mining virtual currencies is considerable compared to the value of virtual currencies," the letter said.
While the letter acknowledged that the exact energy consumption of bitcoin mining also depends on geography, he added that "virtual currency companies should consider greater transparency of the location and equipment used in bitcoin mining." in order to add clarity on the environmental impact.
Every organization should take a "proportionate approach"
While there are pressing concerns about bitcoin's energy consumption, it is also important to note that the environmental impact also depends on how the energy was produced. For example, the Chinese region of Sichuan is a bitcoin mining hub but it is also a region that produces an overabundant amount of hydroelectricity.
According to the letter, the NYDFS expects all regulated virtual currency assets to conduct an assessment of the risks associated with climate change that could have a direct or indirect impact.
Although the NYDFS says it understands that climate change is likely to affect organizations differently, the regulator's letter states that each organization should take a "proportionate approach" that reflects its exposure to the financial risks associated with climate change.
"DFS is developing a strategy to integrate climate-related risks into its oversight mandate," the letter states, indicating that mitigating risks associated with climate change will likely remain on the regulator's radar in the future.
