In brief
- European crypto investment firm ETC Group will offer a carbon neutral Bitcoin exchange-traded product (ETP).
- The firm will bear the costs of carbon offsetting and won’t make the green alternative more expensive.
Crypto investment firm ETC Group announced Friday plans to take Europe’s most popular exchange-traded Bitcoin product carbon neutral after Elon Musk stirred demand for environmentally-friendly crypto funds and the European Union clamped down on dirty investments.
South Pole, a Swiss carbon finance consultancy, will find green investments that offset the carbon produced by gas-guzzling Bitcoin miners.
“It's actually something that we'd been working on in the background, and then it got accelerated by the Elon Musk tweets,” ETC Group’s co-founder and CEO Bradley Duke told Decrypt. This spring, the Tesla CEO slammed Bitcoin mining as a dirty industry, leading some investors to dump their Bitcoin holdings.
An ETP, or exchange-traded product, is a security that tracks an underlying asset or financial instrument. It is similar to an exchange-traded fund (ETFs) but most governments prohibit those. Both products, however, let people invest in Bitcoin on the stock market without holding the cryptocurrency itself.
ETC launched its Bitcoin ETP in Europe last June. It now holds 17,674 BTC (~$585 million) stored in vaults by California-based BitGo, and it has the highest trade volumes of any Bitcoin ETP in Europe.
Offsetting Bitcoin's carbon emissions is expensive because Bitcoin mining uses a lot of dirty electricity. Currently, Bitcoin consumes an estimated 68 terawatt-hours (TWh) of electricity per year. China’s mining crackdown reduced this figure; on May 10, the network’s estimated annual consumption hit 141 TWh. A September 2020 report from Cambridge University estimated that 39% of Bitcoin mining involved renewable energy. Crypto asset manager CoinShares puts it as high as 77.6%.
Duke said that the company plans to eat up the costs of going green—an undisclosed “significant” amount—and won’t pass on those costs to investors in the Bitcoin ETP. However, he said he would consider shifting the costs of the carbon-neutral ETP elsewhere.