IMF's Call to Curb Cryptocurrency's Carbon Footprint Through Tax Surge

Understanding Crypto Industry's Carbon Footprint

The International Monetary Fund (IMF) has released a new report highlighting the rising carbon footprint of the crypto sector and stressing the need for control. To address this, the IMF has proposed a significant tax increase on crypto mining businesses to encourage the adoption of greener practices.

Current Emissions and Expected Growth

According to the IMF's latest estimates, crypto mining alone could generate 450 million tons of carbon emissions by 2027, accounting for 1.2 percent of the global total. Two IMF officials -- Shafik Hebous and Nate Vernon-Lin -- propose that taxes for crypto mining businesses may need an up to 85 percent hike to drive the industry toward cleaner practices.

According to IMF estimates, a direct tax of $0.047 (approximately Rs. 3.95) per kilowatt hour would lead to reduced emissions in line with global goals.

The Power Demand of Bitcoin Mining

The process of Bitcoin mining has been notorious for its high energy consumption, with one BTC transaction requiring electricity equivalent to the average person in Ghana or Pakistan's consumption over three years. Crypto data centers also significantly contribute to the industry's carbon footprint.

• Crypto mining and data centers accounted for 2 percent of world electricity demand in 2022.
• This figure is projected to rise to 3.5 percent in three years.

Policy Recommendations from IMF

The IMF has urged global regulators to guide crypto and AI companies towards reducing fossil fuel reliance, suggesting a global carbon price set at around $85 (roughly Rs. 7,136) per ton by 2030. Additionally, implementing electricity taxes alongside credits for zero-emission initiatives could be beneficial.