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ESG in Crypto: Building a Responsible and Inclusive Economy

The Bridge


  • The environment-friendly proof-of-stake consensus is notably prevalent in emerging networks, signifying its potential as a replacement for the energy-intensive proof-of-work consensus.
  • Approximately 52% of Bitcoin mining energy is sourced from renewables, expected to grow by 6.2% annually, showcasing a positive trend toward sustainability.
  • Cryptocurrencies continue to serve as a means to include those excluded from traditional financial systems, with the Central & Southern Asia and Oceania (CSAO) region leading global crypto adoption.
  • Despite a slight increase in cryptocurrency-linked illicit activities, such behavior accounts for less than 1% of the total cryptocurrency transaction volume, maintaining a minimal impact.
  • Governance within the crypto space is not flawless, yet decentralized networks offer increased transparency and democracy. The industry is likely to intensify efforts in defining and quantifying governance factors.
  • Diversity remains a challenge in the crypto and digital assets sector, although several entities and DAOs are actively striving to enhance diversity within the cryptocurrency space.
  • While current quantification of cryptocurrencies’ ESG alignment is challenging, the industry appears to be leaning towards a more ESG-friendly nature, reflecting an overall positive trend in the space.


Climate change has led to rising sea levels and intensified extreme weather events, resulting in widespread disruptions and economic setbacks. Recognizing the increasingly severe impacts of this global crisis, it is imperative to take immediate action. This urgency also extends to investment strategies, which not only mitigate environmental risks but also foster resilience for investors and the planet in the long term. Moreover, institutions must address critical social issues including fair labor practices, diversity, community engagement, and human rights. Alongside, robust governance practices are pivotal in minimizing risks, preventing misconduct, and fostering ethical behavior within organizations.

These factors, encapsulated in ESG (Environmental, Social, and Governance), hold significance for investors. In this edition of The Bridge, we delve into this intersection. Our exploration reveals that numerous cryptocurrencies adhere to ESG standards, making them viable candidates for a well-diversified portfolio.

Environmental Factors

Bitcoin’s Power Consumption

According to the New York Times, Bitcoin mining consumes approximately 0.5% of the world’s total energy production, with estimates attributing 60-77% of global crypto-asset electricity usage to Bitcoin alone. The US leads the global Bitcoin mining industry, producing more than 38% of the network’s hash rate. In May 2023, Bitcoin mining devoured about 95.58 terawatt-hours, peaking at 204.5 terawatt-hours in 2022, surpassing Finland’s annual power consumption. In fact, a single Bitcoin transaction consumes energy equal to nearly 100 thousand Visa transactions.

The energy-intensive nature for the Bitcoin network stems from its Proof-of-Work (PoW) mechanism, essential for security and to maintain its decentralisation. This mechanism is designed in a way that miners (entities running full nodes of the Bitcoin network) compete to create the next block and get the rewards paid in Bitcoin. As only the fastest miner get the rewards, mining has become an industry where thousands of mining racks run parallel to solve cryptographic puzzles that unlock these rewards. It is important to note that miners are the sole parties securing the network since they ensure that no transactions are fraudulent. The Bitcoin reward incentives help retain miners within the network, thereby preserving security. The consumed energy is thus not wasted, but is used in securing the network.

However, in response to environmental concerns, the Crypto Climate Accord (CCA) aims to decarbonize the crypto industry by transitioning to renewable energy by 2030 and achieving net-zero greenhouse gas emissions by 2040. At present, the accord is focused on two primary goals:

  • Attaining net-zero emissions from electricity usage among CCA Signatories by 2030.
  • Collaborating with CCA Supporters to establish benchmarks, resources, and technological advancements that expedite the integration of fully renewable-powered blockchains. The aim is to confirm advancements toward this objective by the 2025 United Nations Framework Convention on Climate Change Conference of the parties 30, in short UNFCCC COP 30 conference.

Energy sourcing for mining has also evolved over time. The Bitcoin Mining Council, comprising 48.4% of global miners, reported that 58.9% of Q4 2022’s mining electricity originated from renewables, a figure that declined to 52% in 2023. These renewables currently encompass hydro, wind, solar, and nuclear power. Some models also predict a 6.2% yearly increase in Bitcoin’s sustainable network composition.

Bitcoin extensive energy consumption is a consequence of the PoW consensus mechanism. We observe the mix of energy used to produce bitcoins is becoming more sustainable but the use of energy remains elevated. Looking at Ethereum, or more generally Proof-of-stake blockchains, leads to a different conclusion as the mechanism guaranteeing the security of the chain does not depend on energy anymore.


Contextualizing Ethereum’s energy consumption involves comparing its annualized estimates with various industries, a vital step in grasping its relative consumption levels. Operating on a Proof-of-Stake (PoS) consensus mechanism, Ethereum utilizes its native cryptocurrency ETH instead of traditional energy sources to secure its network. According to a Crypto Carbon Ratings Institute (CCRI) study, the network’s global energy consumption is approximately 0.0026 TWh/yr (terawatt-hours per year).

To provide a clearer perspective, the pre-Merge proof-of-work Ethereum consumed 8100 times this amount, while Bitcoin’s consumption remains at 53000 times this level. The payment network PayPal consumes about 100 times this energy amount, estimated at 0.26 TWh/yr.

Figure 1: Visualisation of the power consumption of ETH Proof-of-Stake

Source: Ethereum Foundation, AMINA Bank AG

Post the implementation of The Merge, Ethereum electricity consumption reduced significantly, plummeting by over 99.95%. This significant decrease coincided with a staggering 99.992% drop in its carbon footprint, notably enhancing both environmental sustainability and network security.

Beyond its remarkably low energy usage, Ethereum nurtures a vibrant regenerative finance (ReFi) community too. Leveraging Ethereum’s infrastructure, ReFi applications develop financial tools that actively contribute to positive environmental impacts. These initiatives span support for blockchain-based digital carbon markets, technological advancements in carbon credit validation and transactions, facilitated by blockchains’ transparency and enhanced accessibility.

Among platforms like Gitcoin, designed to fund public goods within the Web3 ecosystem, climate rounds promote environmentally conscious development on Ethereum’s application layer. These initiatives, coupled with endeavors like decentralised science (DeSci) that enable scientists raise funding and build on the open science movement, position Ethereum as a technology fostering positive environmental and social outcomes.

Is Proof-of-Stake the way forward?

Unlike PoW, the mechanism driving PoS is energy conserving. Contrary to PoW, where miners compete to mine the next block, PoS validators are randomly chosen to validate the next block on the blockchain network. As a result, PoS validators do not need more computers or expensive hardware to get higher rewards; they need to lock more coins (of the native cryptocurrency) in the network to increase their chance of being selected in the next validating round. In addition to energy efficiency, PoS allows anyone to contribute to network security via delegation of their native coins to a particular validator and earn rewards. PoS also creates more opportunities for scaling the capacity of the blockchains. With sharding, for example, smart contracts can run in parallel, increasing throughout and reducing (gas) fees on the network. The prevalence of PoS across most new networks indicates its potential as the future of blockchain and cryptocurrencies. This trajectory is not only rooted in technical advantages but also underscores its capacity to significantly reduce energy consumption.

Social Inclusion

Financial Inclusion

Improving financial inclusion is vital for ensuring everyone has access to basic financial services and opportunities. Engaging in crypto transactions merely necessitates two essential elements: an internet connection and a communication device, preferably a simple smartphone. Encouragingly, the adoption of smartphones is progressing rapidly. Currently, 6.72 billion individuals (roughly 82% of the global population) utilize smartphones. When considering this alongside sustained internet availability, the accessibility of cryptocurrency transactions is poised to increase progressively in the future.

With many people worldwide still being left out of the traditional financial system, cryptocurrencies offer a way to bridge this gap and help more people join in. The absence of intermediaries in crypto makes them a great fit for bringing financial services to communities that do not have access to traditional banks. Unlike traditional bank accounts, there is no minimum amount to open a crypto wallet, no maintenance fees, only transaction costs. This opens opportunities for those who could not use standard financial services to make transactions, save money, and get credit.

The United Nations estimates that roughly 800 million people in the world are recipients of flows of money sent by their family members who have migrated for work. (remittances) According to the World Bank, sending remittances costs an average of 6.20% of the amount sent. Sending money through regular banks can be slow and costly. However, with cryptocurrencies, one can send money almost instantly and at much lower costs. While traditional banking systems take days for transfers, cryptocurrencies like Bitcoin and Ethereum can do it in minutes, or even seconds on platforms like Solana, Avalanche and Arbitrum.

The latest Chainalysis report places the Central & Southern Asia and Oceania (CSAO) region at the forefront of the global crypto adoption index, hosting six of the top ten countries in this ranking. While grassroots crypto adoption has witnessed a decline globally this year, there has been a noticeable rebound from the lull experienced in late 2022, coinciding with the period of FTX’s downturn.

Table 1: Global Cryptocurrency Adoption Rankings

Illicit Activities

According to the United Nations, illicit activity represents between 2 and 4 % of global GDP. This puts global corruption at USD 2 trillion (going by World Bank’s estimates).

Figure 2: Illicit share of total cryptocurrency transaction volume

Source: Chainalysis, AMINA Bank AG

Chainalysis reported an increase in illicit transaction volume despite the market’s downturn last year, reaching a record high of USD 20.6 billion, marking the second consecutive annual increase. The year 2022 was tumultuous in cryptocurrency history, witnessing the collapse of several major firms, including Celsius, Three Arrows Capital, FTX, and others, with some facing allegations of fraudulent activities. Notably, 43% of the illicit transaction volume in 2022 was linked to activities associated with sanctioned entities. This surge occurred in a year when the Office of Foreign Assets Control (OFAC) initiated some of its most ambitious and challenging crypto sanctions. While the share of cryptocurrency activity tied to illicit behavior increased for the first time since 2019, rising from 0.12% in 2021 to 0.24% in 2022, it is crucial to note that overall illicit activity in cryptocurrency represents less than 1% of the total volume.


Blockchain protocols are networks, granting authority to those who can alter the code, thereby holding the ability to shape or disrupt the network. Governance for cryptocurrency therefore plays a pivotal role in ensuring network security, overseeing protocol evolution and nurturing community consensus. Fostering transparent decision-making to maintain stability is crucial for any network’s decentralisation. In managing protocols, governance functions either off-chain or on-chain. Established blockchains like Bitcoin and Ethereum employ off-chain governance, allowing participation in protocol changes without possessing the native currency of the protocol.

On Ethereum, this is done through Ethereum’s EIPs (Ethereum Improvement Proposals) which are publicly listed and reviewed by involved participants. A member typically introduces an EIP on the governance forum, presenting a comprehensive outline of the proposed technological alterations and the rationale behind the suggestion. The community offers feedback, which is relayed to the core developers during the “AllCoreDevs call.” Subsequently, a decision is made whether to proceed, postpone, or dismiss the proposal. If it progresses, the EIP undergoes iterations based on feedback from pertinent members, culminating in a final proposal. This final version is tested on test nets before being slated for implementation on the Ethereum Mainnet.

The Bitcoin Network employs a similar process through Bitcoin Improvement Proposals (BIPs), where informal proposals garner community feedback, progress to become BIPs based on substantial support, and undergo transparent review and testing within the developer community before immediate code-based blockchain alterations, necessitating significant miner consensus to incorporate the change.

Similarly, dapps (decentralized applications) follow a governance process distinct from core developers, often incorporating governance tokens for on-chain voting via platforms like, determining implementation based on weighted average token-holder votes. However, governance transparency can be imperfect, with concerns regarding decentralized participation authenticity, especially when anonymous market participant identities obscure actual token ownership and influence. For more on DAOs, read our previous article here.

The distribution of coins at inception (referred to as the project’s tokenomics) crucially influences governance analysis, clarifying token holders’ incentives for decisions. Increased transparency and wider participation in decision-making often result in slower governance processes, requiring detailed procedures, even in emergencies such as bugs or critical issues. In case of emergencies (for instance, a bug), an elaborate proposal and voting procedure must be done appropriately.

The realm of ESG governance acknowledges imperfection, and the domain of crypto governance within this context is still in its formative stages. At this nascent phase of crypto governance within the ESG framework, universally accepted standards specifically tailored to cryptocurrencies are absent. Consequently, the evaluation of cryptocurrency governance is a nuanced, case-by-case process. For instance, Bitcoin’s governance embedded within its protocol mitigates misuse by virtue of its decentralization. Similarly, sufficiently decentralized cryptocurrency ecosystems, like Ethereum, boast robust governance through democratic processes. As the crypto industry advances, there will likely be a heightened focus on defining and quantifying ESG criteria that suit the distinctive attributes and complexities of blockchain and cryptocurrencies. This evolution will center on refining the understanding and measurement of ESG factors within the unique landscape of these technologies.


Diversity is a crucial aspect of ESG, reflecting inclusive practices that promote varied perspectives and equitable opportunities. In traditional ESG frameworks, diversity, especially in leadership and workforce, is seen as positive, fostering innovation and better decision-making. In the context of crypto ESG, while diversity initiatives are emerging, the industry currently faces challenges with inclusivity and representation. Efforts to enhance diversity in crypto ESG are vital, as they not only align with ethical principles but also contribute to a more resilient and innovative ecosystem by embracing a broader range of talents and perspectives.

Gender diversity remains a challenge in the crypto and digital assets sector, not only at the leadership level but across the industry. A study by Boston Consulting Group highlighted that a mere 13% of Web3 founding teams included women, with only 27% representation in non-technical roles among Web3 startups.

According to a BlockFi survey, 24% of women own crypto, with 70% among them being HODLers, surpassing the market average of 55%. However, despite 45% knowing how to buy crypto, 75% of female crypto owners have solely traded, not engaging in other ecosystem opportunities like earning interest or rewards, mining, or staking. Larger crypto product adoption among women remains limited, with only 10% utilizing crypto interest accounts and 5% purchasing NFTs or participating in crypto mining. A mere 6% of leading crypto and blockchain companies have female chief executives. However, at top-performing companies like Chainalysis and BitOasis, women represent 46.2% and 42.9% of staff, respectively.

In Africa and Latin America, the rate of new crypto adoption is remarkable, surpassing Western adoption measures. Notably, crypto usage among Black and Hispanic Americans exceeds that of white Americans, as indicated by a USA Today/Harris poll. Artists of color are increasingly embracing the NFT market, bypassing traditional funding intermediaries, while minority focused DAOs are emerging, aiming to empower specific groups through collective bargaining, such as UnicornDAO which aims to collect and showcase art created by women and individuals belonging to the non-binary and LGBTQ+ communities.

Several entities and DAOs are actively working to improve diversity in the cryptocurrency space. Diversity in Blockchain (DiB) focuses on creating equal opportunities, advocating for change through data collection, hosting events, and job fairs. HER DAO emphasizes gender diversity, sponsoring events and conferences for women in Web3. Women in Web3 is a community and DAO supporting women entrepreneurs in Web3 ventures, while World of Women is an NFT collection and cultural movement celebrating women in the space.


This piece delves into ESG considerations within the cryptocurrency and digital assets industry, exploring climate impact, financial inclusion, social aspects, illicit activities, and governance. ESG standards cover a broader spectrum, accessible on the CFA website, but our focus on specific factors arose from recurring discussions with clients and the need to address prevalent market misconceptions. While definitively aligning cryptocurrencies with ESG remains complex, many exhibit alignment, particularly the shift toward more ESG-friendly protocols, witnessed in the transition from power-intensive proof-of-work protocols like Bitcoin towards energy-efficient proof-of-stake alternatives like Ethereum, Solana and Avalanche. Integrating ESG principles into crypto emphasizes environmental awareness, social responsibility, ethical governance, investor compatibility, and sustainable practices, aligning the industry with prevailing global values and trends.

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Yves Longchamp

Head of Research AMINA Bank AG

Sonali Gupta

Senior Research Analyst AMINA India

Rishabh Nagar

Research Analyst AMINA India

Anirudh Shreevatsa

Research Analyst AMINA India

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