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- Bank of America research shows bitcoin's immense environmental footprint.
- It is one one of the biggest carbon-emitting sectors, on a par with huge firms and even the US federal government.
- Other less climate-related concerns include use of bitcoin in cybercrime such as money laundering.
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Bitcoin's energy consumption is comparable to that of major corporations like American Airlines, which flies over 200 million passengers a year, and even the entire US federal government, which employs 2 million people, according to research on Wby Bank of America.
Each $1 billion in inflows into bitcoin uses the same amount of energy as 1.2 million cars, estimates the report. "Looked at differently, a single Bitcoin purchase at a price of ~$50,000 has a carbon footprint of 270 tons, the equivalent of 60 ICE cars," Bank of America said in a note published on Wednesday.
Bitcoin's carbon footprint is directly linked to the price. As the price goes up, so do the resulting emissions, as more crypto miners become involved. In turn, the bitcoin network has to become more complex to cope with the demand and prevent hacking. This then requires more hash power, which drives up energy consumption, the bank said.
"Given the relatively linear relationship between bitcoin prices and bitcoin energy use, it is perhaps no surprise that bitcoin's estimated energy consumption has grown over 200% in the past two years," Bank of America said.
Bitcoin uses as much power as a small, developed country like Greece, which has a population of over 10 million people, at a time where most companies and countries are focused on lowering their environmental impact, the bank said.
"Another key concern is that most hash power comes from China, where the government actively encourages bitcoin mining and where electricity costs are very low.
"Nearly 60% of Chinese electrical generation is from coal fired power plants, with less than 20% coming from natural gas or renewables," Bank of America said. This means most bitcoin mining is fueled by unsustainable fossil fuels."
Other crypto currencies including Ethereum's ether token are only slightly less impactful on the environment, the report said. However, the digital currencies proposed by central banks would not have the same negative impact, it added.
Beside the environmental impact, the report also discusses social and governance risks associated with investing in bitcoin, which Bank of America says should not be underestimated.
Democratisation and decentralisation of money have value, "But negatives outweigh. Anonymity aids nefarious activities," it said.
US Treasury Secretary Janet Yellen has said on numerous occasions one of her concerns around cryptocurrencies is their use in criminal online activity, including money laundering.
The report also provides a wider assessment of Bitcoin, coming to the conclusion that the main reason for investing into Bitcoin is its price appreciation - rather than inflation protection or diversification.