Peter Thiel, tech billionaire, has turned gamekeeper again. Though he’s an enthusiast for Bitcoin and cryptocurrencies in general, he’s just uttered the following warning at an event for the Richard Nixon Foundation:

“Even though I’m a pro-crypto, pro-Bitcoin maximalist person, I do wonder whether if at this point Bitcoin should also be thought of in part as a Chinese financial weapon against the U.S.” says @Paypal co-founder Peter Thiel.

More on cryptocurrencies from The #NixonSeminar: pic.twitter.com/sIUQTQEWgr

— Richard Nixon Foundation (@nixonfoundation) April 7, 2021

It’s not there yet, but if Bitcoin becomes established as fully-fledged rival to government-issued currency, then that would be disruptive.

In particular, and as Thiel explains, it would threaten the US dollar’s position as the world’s reserve currency. If the dollar loses its pre-eminent status, then America would find it much harder to fund its enormous public debts. Among other things, the defence budget would come under pressure — forcing the US to scale-back its role as the global policeman.

Guess who would benefit most from that?

It is unlikely that Bitcoin will displace conventional currencies. Bitcoin may be backed by its self-imposed scarcity, but dollars, euros, pounds and yen are backed by politics. It’s pretty clear who’s on the winning side.

There’s another problem with Bitcoin: it’s absolutely filthy.

I’m not referring to crypto’s less savoury uses here, but to its technological infrastructure. Basically Bitcoin is an energy hog. The computational processes by which transactions are processed and the Bitcoins themselves created (‘mined’, in the jargon) use a lot of electricity.

Most Bitcoin mining takes place in China (even though the use of cryptocurrency is more-or-less banned there). It is therefore generated by China’s infamously dirty coal-fired power stations.

New research published in Nature this week, puts some numbers on Bitcoin’s carbon footprint:

This equates to “carbon emission flows” of “130.50 million metric tons” — which, for purposes of comparison, is more than all the greenhouse emissions from the Czech Republic.

It’s crazy. If western governments want to take Bitcoin down a peg or two then they could slap a hefty carbon tax on purchases by western companies and financial institutions. However, a more constructive approach would be to support the development of a low carbon infrastructure for crypto currencies and other blockchain-based operations.

Any system that is supported by widely distributed network of computers could, in theory, allocate work to locations around the world with a surplus of power from renewable sources. Variable generation is, of course, the big drawback of wind turbines and solar panels. Sometimes they produce too little for local needs and sometimes too much.

But if we could do more to shift demand for computation around the planet, then that could help soak up surplus production of renewable power wherever and whenever it occurs. Thus we could decarbonise crypto and boost the economics of clean energy.

Unless western governments become as authoritarian as Beijing, they won’t be able to stop crypto even if they wanted to. However, they can influence its evolution. Bitcoin, after all, is the beginning not the end.