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Cryptocurrency Has Raised Environmental Concerns — Local Governments Are Stepping In

ARI SHAPIRO, HOST:

It was big news when Elon Musk said Tesla would accept Bitcoin as payment for cars. But just a few days later, he abandoned the policy, citing the rapidly increasing use of fossil fuels to run the computers that generate Bitcoin. Similar concerns have U.S. jurisdictions now writing new rules for so-called crypto miners. Megan Myscofski reports.

(SOUNDBITE OF DATA CENTER HUMMING)

MEGAN MYSCOFSKI, BYLINE: This video shows the space that a Bitcoin mining company called HyperBlock used to occupy in a former plywood mill just outside of Missoula, Mont. Jason Vaughan, the former site manager, says entering the building was almost like stepping into a giant erector set.

JASON VAUGHAN: And most of it's, you know, steel and metal. There's just, like, hundreds of thousands of little blinking lights and whatnot.

MYSCOFSKI: Those lights were on racks and racks of computers they used to generate the cryptocurrency Bitcoin by solving complicated mathematical problems. That requires intense amounts of computational power and electricity. And HyperBlock grew rapidly to become one of the largest Bitcoin mining operations in North America. Concerns about how much energy it used drew the attention of Missoula's county commissioners. They say at its peak, the data center used as much energy as about a third of all households in the county. They started crafting new regulations. Missoula County sustainability program manager Diana Maneta.

DIANA MANETA: We thought quite a lot about this, not wanting to prohibit this industry in the county but wanting to figure out, how do we make this compatible with the county's values and the county's goals, especially the goals related to climate change?

MYSCOFSKI: The new rules require cryptocurrency companies to develop or buy renewable energy equal to the amount they use. Jason Vaughan with HyperBlock says the rules, along with a pandemic dip in Bitcoin's value, drove his company to bankruptcy just as it was preparing to expand its operations by three times.

VAUGHAN: The majority of it came down to the zoning that was enacted.

MYSCOFSKI: Nikhilesh De is a managing editor at CoinDesk, a website that tracks the cryptocurrency industry. He says Missoula County appears to be the first to enact local regulations on it.

NIKHILESH DE: And I haven't seen anything like this yet, but it wouldn't surprise me if this is a model that gets followed.

MYSCOFSKI: De says putting the burden on the companies to reduce their energy demand could mitigate the problem. Right now they're operating in a Wild West atmosphere, says Marjella Lecourt-Alma, the CEO and co-founder of Datamaran, a firm that analyzes environmental, social and governance investing.

MARJELLA LECOURT-ALMA: On the one hand, you have such a push at current for sustainable investing, right? And then at the same time, you have this massive attention for cryptocurrencies. And that has nothing to do with sustainable investing.

MYSCOFSKI: Lecourt-Alma says senior leaders and policymakers are giving attention to both the economic boom cryptocurrencies represent and their energy consumption and climate impacts. She says social pressure and public perception could push more investors towards forms of cryptocurrency that source greener energy than Bitcoin currently uses. So for now, the old plywood mill that used to house the Bitcoin data center in Missoula is emptier. And the county's sustainability program manager Diana Maneta says she's already heard from people in other parts of the country who are interested in advocating for similar regulations in their own communities.

For NPR News, I'm Megan Myscofski.

(SOUNDBITE OF TOM MISCH'S "THE JOURNEY") Transcript provided by NPR, Copyright NPR.