Bitcoin is being called “digital gold.” And taking the analogy further, some people paint gold mining and bitcoin mining with the same brush of being environmentally unfriendly. Unless that perception changes, some observers say, that could hinder the acceptance of the digital currency by institutional investors.

The topic of cryptocurrencies consumed a good chunk of time at a webinar hosted today by Cboe Global Markets. It featured three well-known names in the exchange-traded fund industry: Cathie Wood, founder, CEO and chief investment officer of ARK Invest; Jan van Eck, president and CEO of VanEck Associates Corp.; and Kevin O’Leary, chairman of O’Shares ETF Investments.

Ark Invest was one of the pioneers in offering bitcoin to investors when it began including it in some of its funds in 2015 via the Grayscale Bitcoin Trust. At that time, Wood said, its price was about $250. (It closed trading today at $52,439.) Jan van Eck has long been a bitcoin bull, and his company has been trying for a number of years to gain approval from the Securities and Exchange Commission to launch a bitcoin ETF.

And O’Leary, formerly a noted crypto critic but now a believer, offered a few warnings about bitcoin not flying with some investors—particularly institutional investors—because of its environmental and social impact. Pensions and endowments using his company’s ETFs as part of their wealth preservation mandates want to know the provenance of the coins being mined.

“A new problem I think a lot of people haven’t considered is whether the coin is compliant with [institutional investors’] committees,” O’Leary said, alluding to the fact that bitcoin is manufactured in countries accused of human rights violations.

“I’m really speaking about China,” he said, adding that’s a problem because that’s the country where most of it is mined.

Bitcoin Mining
In simple terms, bitcoin mining requires powerful computers to solve cryptographic puzzles, and those who solve them are rewarded with a certain number of bitcoins. Bitcoin’s maximum supply is capped at 21 million coins.

Computers engaged in mining are energy hogs, which critics contend make them environmentally unfriendly—especially if they’re made in a country (like China) powered in large part by coal.

But Wood and Van Eck pointed to research showing that crypto mining’s environmental impact might be overstated.

Wood said one of Ark Invest’s analysts did a study comparing bitcoin mining to gold mining, and it showed the energy consumption associated with bitcoin is a fraction of that for removing gold.

And while Van Eck offered that the standards being applied to the bitcoin and crypto world are not necessarily applied to other industries, he acknowledged that ESG concerns are becoming a major issue for bitcoin.

“There’s a good Cambridge University study that shows that 75% of miners use renewable energy,” he said, adding that just about 40% of their total energy comes from renewable sources.

He said that Riot Blockchain, a publicly traded bitcoin mining company, claims to use only renewable energy in its operations.

‘Blood Coin’
O’Leary posited that while bitcoin is ticketed for tremendous growth, it could be constrained in part if institutions that need to comply with ESG mandates are wary of buying bitcoin that’s mined in China or other locales deemed objectionable.

“You can tell the time of creation [of bitcoin tokens], but you can’t tell the location of creation,” O’Leary said. “And if you don’t want to own China coin, or, as it now is being called, “blood coin,” which sounds a lot like blood diamonds, you’re going to have to prove the provenance of where your coin was born, so to speak.”

He added that it could be a challenge for ETFs to show where bitcoin in their portfolios was mined.

Meanwhile, bitcoin and the crypto ecosphere in general are partying on—at least for the time being. Cathie Wood, whose firm has made its mark by promoting the concept of investing in innovative and disruptive companies, sectors and technologies, including bitcoin, unsurprisingly remains very bullish on the currency.

“We believe this is the first truly new asset class since the 1600s, since equities,” she said, noting that bitcoin now has a market cap of nearly $1 trillion.

“One trillion dollars is nothing compared to where this ultimately will be,” she said.