One role of government is to curtail negative externalities. If it's possible for a few people to profit by causing general harm through accelerating climate change, that would be well within the government's mandate to regulate against this.

It's possible that cryptocurrency will be the future of finance. It's also entirely possible that crypto - which is incredibly expensive energy-wise per transaction - is actually a waste of energy and is a net drain on economies which embrace it. It might be a competitive advantage to ban mining.

I guess Sweden will be a part of that experiment and we will see what happens.

I don't see how banning mining will have any negative consequences at all. What benefits would a country get from having a lot of miners? A few people would get rich at the cost of everyone else getting less electricity or higher prices. The miners relocate, and you can enjoy using bitcoin without any of the local externalities of having miners around.

That is an argument against having most non-service industries. Indeed, a similar argument would have been used for off-shoring huge amounts of manufacturing from Western societies to China (why put up with the pollution externalities when the Chinese could pick those up for us?).

The upshot is lots of the know-how now lives in China, the wealth is being generated in Shenzhen instead of the west. The argument was correct, but in hindsight it does look like the positive externalities were greater than the negative. China's growth has been much more impressive than the EUs.

Actually using government mandates to curtain negative externalities would look way different though, right? The negative externality of energy production is the same per unit energy regardless of what the energy ends up being used for.

It’s not about the negative externality of energy production, but the negative externality of Bitcoin mining. Using significant percentage of the available renewable energy, driving up prices and forcing other industries that are far less optional to resort to non-renewable energy. And probably even preventing other net-good uses of cheap energy from ever coming into existence.

Yeah exactly. Another example would be the impact on GPU prices: mining almost certainly plays a role in making GPUs less accessible, which raises the cost of ML for example. There's probably innovations which would affect the world in a positive way which we don't have right now because of the barrier to entry to ML research created by high GPU prices.

“It might be a competitive advantage to ban mining.”

I agree, but couldn’t this be said for a lot of activities? It might be a competitive advantage to ban the production of reality tv shows or video games or cars or steel. Is it really a good idea (or even morally defensible) for the state to make these kind of macro decisions (based on what might be best for the economy)?

"The government making a value judgement about what type of commercial activity is worthwhile is extremely risky" Bullshit. That's what government is for. It already forbids commercial activities as robbery, stealing, fraud etc. If they put crypto into the same basket I wouldn't cry much.

> ...robbery, stealing, fraud...

Those aren't commercial activities. One of the parties doesn't agree to the deal, so they are violations of property rights.

The justification for forbidding them isn't that the government has concerns about the transaction (the robber probably needs the goods more than the person they are robbing, on a needs basis most robberies might be justifiable for all I know). The problem is the involuntary nature of a robbery. That isn't a factor here.

But you don’t justify a ban on robbery because of the energy usage of getaway cars, right?

This is kind of a false equivalence [0], the carbon footprint of the getaway cars would be much smaller.

Generally problems are only handled* when they come up. In this case the carbon footprint of crypto is already a problem, so therefore it is now being handled. Getaway car carbon footprint on the other hand is not a problem as of now, so therefore this is not a correct parallel to draw.

* you could argue that we should have foresight, but unfortunately this is very hard to pull of. Most policy making is thus reactive, not proactive.

[0] https://en.m.wikipedia.org/wiki/False_equivalence

"Historically" the financial innovation that benefitted society was the joint stock company and similar systems of credit that essentially permitted risk pooling on wide scales.

As far as I can tell, bit coins ain't that.

How do we not understand the nature of it? It is a mathematically interesting problem, but the nature of Bitcoin et.al. just makes it useful for speculation and scamming people who think it would become a digital currency.

I have yet to meet someone who bought something real with crypto.

> I have yet to meet someone who bought something real with crypto.

I bought a car last year with Bitcoins

Hi, nice to meet you.

I think externalities should be priced into the cost of resources (e.g. with a Pigouvian tax), but otherwise I entirely agree.

Edit: I suppose, if you want to subsidize all uses of electricity except for cryptocurrency (and a few other areas of your choice), you could simplify this process by only applying the externality tax to miners (etc). But this should be limited to the externality, not arbitrarily high.

But in this case the negative externalities do not come from the mining but from the energy generation. So that is the level where the externalities should be priced in.

In the current environment, you can't separate energy usage from energy generation in terms of externalities. Electrical power is something like a fungible asset, so even if you are using 100% green power (which doesn't really exist), you're still increasing demand for electricity overall, which will result in more carbon-intensive power generation in general.

In other words, decreasing power consumption is as important if not more important than increasing clean energy as a share of production.

Electrical power is only fungible in that sense if significant negative externalities exist which allow units of energy to be priced similarly when their sources vary significantly in total (including societal) costs. If societal costs are internalized (i.e. externalities are eliminated) then fungibility would surely disappear, because a unit of energy produced from coal would surely be more expensive than a unit of energy produced from solar.

Is this a distinction without a difference? If the climate impact of mining were truly priced in, is there any chance this activity would be remotely profitable?

Of course it would be remotely profitable for some of the miners. The difficulty adjustment is making the consensus kind of invariant of the total amount of energy used. Even security-wise Bitcoin would probably be fine at 1/10 or even 1/100 of its current power usage

The role of government is also capturing and charging for negative externalities.

From my town to the state to the federal government NONE of the government entities that affect me have that or anything like it in their charter, mission statement or other rules that define their responsibility.

It isn't. There are lots of negative externalities that the government doesn't get involved in.

Sure, but there are plenty where it does. Noise ordinances, pollution controls, maximum fishing or hunting takes, etc. would all be examples of this.

Good questions to ask is does Sweden need crypto? Does it overall benefit the society than some other type of industry? I would probably argue that it is not very beneficial. Some profits are extracted, but in general economic activity ends pretty much there. Rent a warehouse have one or two people monitor and maintain it.

And it is not like Sweden doesn't already have entirely reasonable financial, payment and banking sector.

> The basic idea of the economy is people can earn the right to energy, and then direct it to a goal of their choosing.

Or is it that people (through government) decide what’s allowed to do in the market, and things with negative externalities are banned or taxed?

I can’t decide to buy an incandescent lightbulb and put my money towards more electricity to drive it.

Countries also ban ponzi schemes and nobody raises an eyebrow.

No capitalist country lets you buy whatever you want for no reason. You aren't allowed to hoard all the food for example, all basic utilities are regulated. So when the global crypto scam starts to hurt unrelated people by raising energy prices those people will start to complain and create regulations like this to protect themselves. I used the word "scam" since that is how most people see the crypto industry, from their perspective this is a scam that drives up energy prices, there is no point in keeping it legal.