Crypto ETFs Go Mainstream
Cryptocurrency exchange-traded funds (ETFs) are no longer a niche investment product. With the U.S. Securities and Exchange Commission’s approval of spot Bitcoin ETFs in early 2024, digital assets have taken a major step toward mainstream financial integration. These ETFs allow investors to gain exposure to cryptocurrencies like Bitcoin and Ethereum through traditional brokerage accounts without the need to manage digital wallets or private keys.
The impact has been significant. BlackRock’s iShares Bitcoin Trust ETF attracted over $35 billion in assets within its first year, and institutional investors worldwide are increasingly viewing cryptocurrencies as a legitimate asset class. Meanwhile, Australia and New Zealand have started laying the groundwork for their own crypto ETFs, with the Financial Markets Authority (FMA) approving the Smart Bitcoin ETF for trading on the NZX.
But while crypto ETFs present a lucrative financial opportunity, they also come with risks—including volatility, security concerns, and regulatory uncertainty. And perhaps the biggest concern of all: cryptocurrency’s environmental impact.
The ESG Challenge in Crypto Investing
Cryptocurrencies, particularly those relying on the Proof-of-Work (PoW) consensus mechanism, have been widely criticised for their massive energy consumption. Bitcoin alone uses more electricity annually than Norway, with its mining operations powered largely by fossil fuels. In 2020-2021, the United Nations University Institute for Water, Environment and Health reported that Bitcoin’s carbon footprint was equivalent to burning 38 billion tonnes of coal, raising concerns among environmentally conscious investors.
New Zealand, which has pledged to cut emissions by 50% from 2005 levels by 2030, must reckon with crypto’s role in its sustainability goals. With global regulators increasingly considering ESG (Environmental, Social, and Governance) criteria in financial markets, the future of crypto ETFs may depend on how well they align with green finance initiatives.
New Zealand’s Growing Crypto Market
New Zealand has adopted a “wait and see” regulatory stance on cryptocurrencies, allowing innovation while monitoring risks. The government has launched a parliamentary inquiry into digital assets, and the FMA’s regulatory sandbox initiative—running until mid-2025—aims to test new financial products, including crypto ETFs, under controlled conditions.
Despite regulatory caution, New Zealand’s fintech sector is growing, with startups and investors exploring blockchain applications in finance, supply chains, and carbon markets. The country’s abundant renewable energy resources could position it as a leader in green blockchain technology—if the right policies and investments are put in place.
A Path Toward Sustainable Crypto Investments
Some cryptocurrencies are already moving toward energy-efficient models. Ethereum, for instance, transitioned from PoW to Proof-of-Stake (PoS) in 2022, cutting its energy consumption by nearly 100%. Other eco-friendly cryptocurrencies like Cardano, Stellar, and Algorand have designed blockchains that use far less energy than traditional PoW networks.
New Zealand could encourage investment in such green blockchain projects, setting itself apart from larger markets like the U.S. and Europe. Possible steps include:
- Developing ESG-focused crypto ETFs that invest in energy-efficient cryptocurrencies.
- Incentivising the use of renewable energy in local blockchain operations.
- Funding research and innovation in sustainable crypto technologies.
- Establishing clear ESG guidelines for digital asset investments.
Globally, some crypto firms have started using carbon offsets or exploring ways to recycle mining-generated heat. However, critics argue that carbon offsets may not fully address crypto’s environmental impact. Instead, a mix of energy reduction, renewable energy adoption, and direct emissions cuts may be needed to create truly sustainable crypto investments.
A Leadership Role for New Zealand?
New Zealand’s financial industry is already seeing rising demand for crypto exposure through ETFs. Banks and investment firms report that both retail and institutional clients are looking for regulated, ESG-compliant options to enter the market.
By acting early, New Zealand has the potential to become a regional leader in green crypto finance, attracting global capital and positioning itself as a testing ground for sustainable blockchain solutions. With its strong renewable energy sector, regulatory innovation, and growing fintech ecosystem, the country has an opportunity to set a global standard for responsible digital asset investing.