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New York regulator warns of climate risks from digital currency mining

The financial regulator in New York has issued a letter to firms across the state, urging greater action on the financial risks arising from climate change.

The New York Department of Financial Services has said that all companies, including those involved in digital currency and Bitcoin mining, should begin to assess risks posed by climate change, and to take steps in mitigation.

The letter follows on from a similar document sent by the regulator to insurance companies across the state back in September.

The letter specifically highlights risks from reduced economic output in response to climate shocks, which it suggested could lead to asset devaluation, increased defaults, tighter lending criteria and widespread financial losses.

It also references flood risk, and other direct harms to businesses and communities that could arise from climate change in the years ahead.

In particular, the regulator said cryptocurrency miners should be aware of the huge environmental impact of mining BTC, which it describes as “sizable” relative to the value of the token itself.

“The energy cost for mining virtual currencies is sizable compared to the value of the virtual currencies…virtual currency firms should consider increasing transparency of the location and equipment used in [BTC] mining.”

The comments chime with a similar warning from Heath Tarbert, Chairman of the Commodity Futures Trading Commission, who raised the alarm about the environmental impact of BTC: “There are issues with mining, of course, so number one [is] environmental issues.”

The regulator said that it expects all firms in receipt of the letter to undertake an assessment of the risks posed by climate change to their business, and to take steps immediately to reduce the likely direct and indirect impacts.

Moving forward, the issue is likely to become an even more important part of compliance with the DFS currently “developing a strategy for integrating climate-related risks into its supervisory mandate.”

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