ESG considerations of cryptocurrenciesOne of the biggest concerns with blockchain technology and cryptocurrencies for investors are Environmental, Social and Governance (ESG) considerations. These issues have added to the volatility experienced within the cryptocurrency market and have impacted many investors.
Arguably, the most important ESG issues are:
- Environmental considerations - Large amounts of computing power: the main environmental concern regarding blockchain is the amount of computer power and therefore electricity needed to run the blockchain and verify the transactions.
- Social considerations - Cryptocurrencies being used for crime: as cryptocurrencies are not regulated, many investors are hesitant to invest as these assets are sometimes used for illegal activity and are an easy way to make transactions with no middle party totally anonymously.
- Governance considerations - Unregulated markets: as cryptocurrencies are new and innovative assets, the regulatory environment in which they operate is changing quickly.
Digital assets are still new in financial markets and many investors are trying to assess how they work and how they can be included in their portfolios. Additionally, there is a lot of concern surrounding ESG risks, rules and regulations with digital assets. For these reasons digital assets experience very volatile and unexpected returns.
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