Tangential thought...
I might be mistaken, but how can one even collect on defaulted debt denominated in BTC? I thought that the BTC owner still has to transfer BTC themselves, since only they would know the private keys.
Wouldn't the collector literally have to physically threaten the individual to transfer the BTC back, since it's not like they can get a court to order the bank to do it.
I know that ETH supports smart contracts that could in theory automate the terms of the loan, but then what happens if the debtor goes bankrupt?
What makes you think the court can't order the bank to do it? The court can order you to give some assets up, and if you refuse, they can order your employer to deposit wages directly into creditor's accounts, or the creditor can seize other assets for nonpayment. (For example, some creditors managed to temporarily have an Argentinian Navy ship seized after their default.)
Take a simple thought experiment. Someone makes a transaction with VISA. That requires updating the seller's bank's ledger, the buyer's bank's ledger, and VISA's computer. Let's round that up to a dozen computers who need to know about that transaction. Now consider Bitcoin. Those same three computers need to know about that transaction... and so does everybody else who runs a full node. We haven't considered a picojoule of energy consumed by proof-of-work yet, and Bitcoin has already consumed far more energy than VISA.
So how about that proof-of-work? Well, let's compare a bank's energy consumption. Go to their financial statements, and pick out the line item that includes energy costs. If you're not sure which line item that is, add all of the plausible ones together (and round up, because what's the harm in overestimating here?). I don't know how much they pay for energy, so let's say it's 1¢ per kWh because what's the harm in rounding up? Crunch the numbers, and banks still use far less energy than Bitcoin's proof-of-work, even by our wastrel overestimation numbers. Oops, I forgot to account for the different volumes. Doesn't matter--banks are moving more money on less energy than Bitcoin.
Much of the ancillary functions you want to include to make Bitcoin's energy consumption seem less embarrassing would still exist even if the world magically switched from USD to BTC overnight. The loan officer evaluating how much interest to offer on a mortgage to a first-time home buyer would still be doing exactly the same thing. The loan shark driving to bust someone's kneecaps for not paying back loans on time would still be doing exactly the same thing.