Despite the current turbulence, cryptocurrency executives from various companies attending the convention have taken over Davos’s main boulevard to promote digital asset adoption at the World Economic Forum conference, which brings together global political and commercial leaders.
Various activities, such as a free Bitcoin pizza stall and a ‘Liquidity Lounge’, have been provided to attendees on the sidelines of the event.
Several blockchain firms are driving the cryptocurrency agenda. This year’s session, according to the Securrency CEO, Dan Doney, aims to establish relationships and networks, as well as highlight how to bridge the gap between new technologies and traditional finance.
According to Stan Stalnacker, chief strategy officer at social network Hub Culture, which also operates a digital currency, 50% of Davos’s stores have attracted crypto and blockchain-based organisations.
WEF on Cryptocurrency
While the crypto crowd dominates Davos streets, whether these digital assets can become friendlier to people and the environment has emerged as one of the topics of the meeting.
As per the WEF, to fully realise the benefits of cryptocurrencies, there is a need to address their energy consumption and perception. This is because these digital assets have been carrying a bad reputation of not being eco-friendly, according to environmentalists.
For example, Bitcoin uses more energy per year than Sweden, Norway or the United Arab Emirates combined.
Bitcoin uses the so-called proof of work methodology (PoW), which consumes increasingly large amounts of energy. There is another methodology, proof of stake (PoS), which is significantly more energy-efficient and used by other cryptocurrencies, but is less secure.
However, Change the Code Not the Climate, a campaign to switch bitcoin mining from PoW to PoS, believes that the conversion may cut bitcoin’s carbon footprint by 99%.
Another famous cryptocurrency, Ethereum, has been attempting to transition from PoW to PoS for the past six years.
WEF believes that when it comes to societal effects, crypto has a stronger argument.
“Cryptocurrencies can promote financial inclusion by driving innovation in financial services, like peer-to-peer micropayments, potentially providing accessibility to anyone with an internet connection and reducing costs by automating financial services at scale,” noted WEF.
But cryptocurrencies can put the financial system in danger, for a variety of reasons, including encouraging criminal activity and a lack of knowledge, transparency and regulation. Union Minister of Finance Nirmala Sitharaman, too, recently stated that the biggest risk of cryptocurrencies could be money laundering and its use to fund terrorism.
While crypto has a reputation for providing cover for criminal activities, those who have attempted to quantify it have found that it may only account for a small portion of total activity.
According to Chainalysis, criminal activity contributed to less than 1% of overall crypto activity between 2017 and 2020.
However, WEF stated in a blog post that criminals and anyone looking to disguise their footprints will continue to be drawn to cryptocurrencies.
“That means introducing better know-your-customer (KYC) regulations, periodic reporting and potentially a framework which includes penalties for violation of disclosure requirements,” it added.
It further noted that “finding the right balance between the attractions of anonymity and increasing trust in cryptocurrencies through disclosures will be key and a delicate balancing act”.
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