How Bitcoin stacks up against ESG

Despite its market tumult, Bitcoin continues to dominate headlines. Its maturity into a traditional asset class is evident by its ticker symbol, BTC, displayed on morning finance programmes and news sites.

While adoption of the digital currency continues to rise, however, it remains a misunderstood technology and asset class.

In this paper, we explore specific use cases to:

evaluate its environmental, social and governance (ESG) impact
highlight some misconceptions that persist
showcase creative approaches for using Bitcoin throughout the ESG journey

An overview of the opportunities and creative approaches that deliver value and drive trust with key stakeholders.

Bitcoin’s role in the ESG imperative

Unpacking its impact on sustainability and common misconceptions

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How big is Bitcoin's carbon footprint?

Bitcoin’s environmental impact has been hotly debated for years. In particular, the energy consumption required to mine Bitcoin.

The use of energy is not the primary issue, but rather the emissions linked to the production of that energy. While its emissions may be lower than often discussed, stakeholders are focused on industries and firms achieving net zero.

Some strategies to reduce its carbon footprint include:

using renewable energy to lower costs and incentivise further production
balancing electrical grids with demand response programmes
recycling heat generated by mining rigs for commercial and residential buildings, and
converting flared gas into electricity used for Bitcoin mining, thereby reducing the amount of methane released directly into the atmosphere.

Tackling illicit use, driving inclusivity

The decentralised and pseudonymous nature of Bitcoin transactions often raises concerns about their potential to facilitiate nefarious activity. Yet, illegal and illicit use of crypto only accounted for 0.24% of total transaction volume in 2022 according to a 2022 Chainanalysis report.

Tackling illicit activity is an essential objective for the industry. At the same time, there are opportunities to help drive value within the social pillar of ESG to advance inclusion.

One of Bitcoin's benefits to society has been in lowering the cost and speeding up remittances, which is a major source of wealth for low- and middle-income countries. Its role in helping to stabilise microgrids has also resulted in more consistent and less expensive electricity for residents in rural areas. The digital currency further offers the opportunity for financial freedom, providing the unbanked, and others excluded from the traditional financial system, access to financial services.

Block(chain)ing against misuse

One of Bitcoin’s most prominent features is its decentralisation, which removes the need for a trusted intermediary.

Its system rules are such that no person can modify the protocol rules or data of a transaction. This means that it is near impossible to make changes across the network of participants once a transaction is finalised, and enables details to be cross-checked and verified.

What results is a system that cannot be abused or misused by those in power or even individuals with ulterior motives due to its decentralisation.

Download our paper for more insight into the Bitcoin ecosystem.

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Antony Ruddenklau

Partner, Head of Financial Services, Global Head of Fintech and Innovation, Financial Services, KPMG International and Head of Payments, Asia Pacific

KPMG in Singapore

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