An inquiry into the nature, impact and risk of cryptocurrencies has been announced by Parliament’s Finance and Expenditure Committee.
It will look into the nature and benefits of cryptocurrencies as well as the risks to both users and Aotearoa as a whole.
“This inquiry will give us a good opportunity to further our understanding of this increasingly important topic,” Dr Duncan Webb, chairperson of the committee said.
The terms of reference will examine how cryptocurrencies are created and traded – including the environmental impact of crypto coin mining.
Mining is a way people acquire cryptocurrency without buying it. Miners receive the currency as a reward for using computer processing power to solve complex problems and then record the data to the blockchain.
It’s that process which has attracted much criticism and attention.
Bitcoin, one of the most popular cryptocurrencies, consumes around 110 Terawatt Hours of electricity per year to create and trade, according to the Cambridge Center for Alternative Finance.
That’s significantly more than what New Zealand uses in a year and equivalent to the likes of Sweden and Malaysia.
It was also the main reason Tesla CEO Elon Musk cited for withdrawing the ability to pay for one of the company’s cars using the currency.
The billionaire said Tesla will reconsider accepting payments once miners are using 50 percent renewable energy.
The New Zealand inquiry will look into how cryptocurrencies are used by criminal organisations to bypass more traditional monetary systems – one of the reasons China cracked down on both mining and the use of cryptocurrencies over the last few weeks.
The authorities there say cryptocurrencies “disrupt economic order, and facilitate illegal asset transfers and money laundering”, Reuters reported.
The inquiry will also establish whether cryptocurrencies can be regulated and whether that’s by sovereign states, central banks or other multilateral cooperation.
“We look forward to engaging with some of New Zealand’s experts on this subject,” Dr Webb said.