Illustration from Freepik

On October 29, the New York Department of Financial Services (NYDFS) released a letter to all major crypto entities in the country, urging all of them to keep track of activities that might be connected to climate change and mitigate their environmental impact, CoinDesk reported on October 29.

The letter was incited by the massive GDP damage that the rise of temperature brings to the country. According to regulators, studies suggest that the impact of mining cryptocurrency can be detrimental for the environment as the process is bound with extremely high energy consumption, which is varying geographically.

The NYDFS suggested that all blockchain companies should consider increasing transparency of the location and equipment used in mining (especially of Bitcoin). All businesses must conduct an assessment of climate change associated risks, which could impact the US economy. Entities like banks, mortgage servicers, and others, are also expected to designate a specific board member, committee of the board, and a senior management position, which will be directly responsible for the management of climate change risks.

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Although regulators were not explicit in describing exactly how corporations should address the environmental risks, the letter stated that each organization should take a proportionate approach to the problem that reflects its exposure to climate change risks.

NYDFS argues that preventing significant changes to the climate is a task, which is extremely important for the country, as researchers have pointed out that reduced economic output in communities affected by it can lead to increased default rates, reduced lending activity, devalued assets, and losses, along with environmental factors, which follow the rise of temperature. The department is said to be developing a strategy for integrating climate-related risks into its field of supervisory in the future, with potential further measures to be taken in regulating blockchain firms.  

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