How fintechs can continue to ride the hype while addressing environmental concerns
2021 saw record cryptocurrency adoption among retail and institutional investors: Robinhood Crypto integrated 6 million customers in the first two months of 2021, and eToro hosted 61% more unique Bitcoin holders in January year over year. But as cryptos become mainstream, their growing carbon footprint has led to growing environmental concerns. Last week, Elon Musk announced that Tesla would suspend Bitcoin Payments and later implied that the electric car company could to sell its $ 1.5 billion in Bitcoin holdings.
The most popular cryptos have a significant environmental impact which is hampered by investor demand for sustainability.
- More crypto trading means more energy consumption. Both the biggest cryptos by market cap, Bitcoin and Ether, are mined through a process called “proof of work”, Which uses huge amounts of energy: Bitcoin mining consumes more electricity per year than Argentina, while the power consumption of Ethereum is comparable to that of all Ireland. And as the trade in these cryptos increases, so does mining activity, as seen in this graphic, where energy use is increasing alongside the hype peaks of 2018 and today.
- Investors increasingly want ESG investments. The total market cap of cryptocurrencies is $ 2.13 trillion, per CoinMarketCap. On the other hand, ESG assets are on the way to worth $ 53 trillion by 2025, a third of total global assets under management, as asset managers scramble to meet investor demand. This is in part due to millennials, who tend to be climate conscious and should hold five times more wealth than today by 2030 thanks to a generational wealth transfer of 68 trillion dollars.
Fintechs should add trading options for less energy-consuming cryptos to continue to take advantage of the industry’s user acquisition opportunities while alleviating environmental concerns. Green investment options are essential for fintechs to ensure their growth momentum, through Insider Intelligence’s expectations, but getting rid of crypto trading would rob them of significant investor activity. Demand for Bitcoin and Ether is unlikely to collapse simply because of environmental concerns, but fintechs should add access to other cryptos with a lower carbon footprint to attract environmentally conscious customers. Cardano, for example, uses the least energy “proof of participation»Verification protocol and was recently added by Revolution. In addition, companies like Tesla could one day choose Cardano or other green cryptos as more sustainable alternatives to Bitcoin, improving their recognition among investors.