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US Government Requests Information On Energy And Climate Implications Of Digital Assets – Technology

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On March 25, 2022, the White House’s Office of Science and
Technology Policy (“OSTP”) published a request for
information on the energy and climate implications of digital
assets (the “RFI”).1  The RFI is part of
President Biden’s recent executive order on digital assets and
will form part of a report that OSTP will issue on the potential
for digital assets to impede or advance efforts to tackle climate
change and the transition to a clean and reliable electricity
grid.

The OSTP report must be issued by September 2022, and the period
to submit information in response to the RFI ends on May 9, 2022,
which leaves little time for market participants to develop comment
letters. Further, OSTP limits the length of comments to 10 pages,
exclusive of supporting data, which puts a premium on incisive and
concise comments. In this Legal Update, we summarize the content of
the RFI and provide our initial thoughts.

Background

On March 9, 2022, President Biden signed an executive order
titled “Ensuring Responsible Development of Digital
Assets
” (the “Order”). The Order directed a
broad range of federal agencies to recommend legislative and
regulatory proposals to foster the development of, and address the
risks presented by, digital assets and a central bank digital
currency. One provision of the order directed OSTP to submit a
report to the president that addresses:

  1. The connections between distributed ledger technology and
    short-, medium- and long-term economic and energy
    transitions; 

  2. The potential for these technologies to impede or advance
    efforts to tackle climate change at home and abroad; 

  3. The impacts these technologies have on the environment;

  4. The effect of cryptocurrencies’ consensus mechanisms on
    energy usage, including research into potential mitigating measures
    and alternative mechanisms of consensus and the

  5. design tradeoffs those may entail;

  6. Potential uses of blockchain that could support monitoring or
    mitigating technologies to climate impacts, such as exchanging of
    liabilities for greenhouse gas emissions, water and other natural
    or environmental assets; and

  7. Implications for energy policy, including as it relates to grid
    management and reliability, energy efficiency incentives and
    standards, and sources of energy supply.

OSTP is required to submit the report within 180 days (i.e.,
September 2022) and then update it in September 2023. OSTP must
consult with the secretary of the treasury, the secretary of
energy, the administrator of the Environmental Protection Agency,
the chair of the Council of Economic Advisers, the assistant to the
president and national climate advisor, and the heads of other
relevant agencies in drafting the report.

Request for Information

The RFI describes climate change as “one of the most
pressing problems confronting our nation and our world” and
describes some of the Biden administration’s climate goals. It
goes on to explain that the “explosive growth of the digital
asset ecosystem may contribute to greater energy use and negatively
impact the climate,” although it also notes that there may be
positive climate consequences from the growth of digital
assets. 

The RFI then lists nine topics on which OSTP would like more
information to better understand the climate impacts of digital
assets. These are:

  1. Protocols: Climate impacts of the protocols used by digital
    assets

  2. Hardware: Climate impacts from the physical components that run
    the protocols for digital assets

  3. Resources: Resources used to sustain and power digital
    assets

  4. Economics: How the energy use of digital assets is affected by
    the value of, demand for and supply of particular digital assets or
    their underlying infrastructure

  5. Past or ongoing mitigation attempts: Past or ongoing attempts
    to mitigate negative climate impacts of digital assets

  6. Potential energy or climate benefits: How digital assets can
    potentially yield positive energy or climate impacts

  7. Likely future developments or industry trajectories: Likely
    developments or industry trajectories that would have implications
    for the future climate impacts of digital assets

  8. Implications for US policy: How the climate impacts of digital
    assets might have implications for US policy

  9. Other information: Any other information, not covered above,
    that is relevant for understanding the climate impacts of digital
    assets

Takeaway

It is important to remember that while OSTP does not have
rulemaking authority, White House reports often inform future
legislative and regulatory efforts. This is particularly true when
the reports are subject to the public comment, as is being done
with the RFI, because the report is likely to cite comments as
evidence that supports its findings. Given the aggressive positions
taken regarding digital assets by many federal regulators, such as
the US Securities and Exchange Commission, it will be important for
the industry to use the RFI to build a firm base of evidence to
support more supportive and innovative actions in the future.

Footnote

1 87 Fed. Reg. 17,105 (Mar. 25, 2022), https://www.federalregister.gov/documents/2022/03/25/2022-06284/request-for-information-on-the-energy-and-climate-implications-of-digital-assets.

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This
Mayer Brown
article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
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