European Union: Market regulator considers ban on Proof-of-work mining

Due to the obvious high energy consumption, EU officials should prohibit the mining of bitcoin and other cryptocurrencies using the Proof-of-Work algorithm. Eric Teden, vice-chairman of the European Securities and Markets Authority (ESMA) reported that to the Financial Times. According to him, the Proof-of-Work consensus algorithms may interfere with the aims of the Paris Climate Agreement.

As an alternative, Europe supports staking as a kind of cryptocurrency mining. This will ensure that the crypto sector adopts more efficient technologies. Throughout 2021, the hottest topics were bitcoin energy use and PoW mining. By the way, PoW is the dominating algorithm among the market’s major cryptocurrencies. Many famous personalities such as Elon Musk, Vitalik Buterin, Jack Dorsey, Michael Saylor were concerned with this issue. Authorities, on the other hand, did not oppose mining at the expense of renewable and excess energy sources. According to the reports, bitcoin mining with renewable energy sources accounts for about 60% of the total.

Moreover, without legislative involvement, Eric Teden believes that far more green energy will be exploited to mine digital assets rather than to replace carbon-based energy sources. He added that bitcoin mining has already become a “national concern” in his own country of Sweden.

Eric Teden is the head of Sweden’s Financial Supervision Authority. Teden began working at ESMA in December 2021. The official, together with the director of the Environmental Protection Agency, Björn Risinger, urged for a ban on energy-intensive mining in the EU in November. The Norwegian government has announced that it may support the proposal of the Swedish state institutions. They also mentioned the excessively high cost of power. Furthermore, in July 2021, the French regulator suggested giving ESMA authority over the cryptocurrency business.

However, as the market grows more financed, crypto assets are garnering an increasing amount of legal oversight. For example, in the United States, the Securities and Exchange Commission prohibited transactions, identifying them as requiring a license. The Chinese government has adopted a harsh position on cryptocurrencies, prohibiting not only trade but also mining, causing bitcoin and other coins to plummet. Analysts predict that cryptocurrency and mining regulation will be a major concern for the cryptocurrency industry in 2022.

No, and no! Between the end of February and the beginning of March 2022, the crypto-asset industry and its supporters in the European Parliament had already succeeded a first time in having a very problematic amendment to the MiCA Law removed. Cryptocurrency consensus mechanisms deemed “unsustainable” — understand PoW (Proof of Work) — would have been condemned to be used only on a “small scale.” In other words, it would have killed Bitcoin and its global, universal appeal.

But, that was without counting on the motivation of the opponents to the consensus by mining cryptocurrencies. Still under the ecological pretext of climate change, a new amendment was added at the last minute on Friday, March 11, for a vote scheduled this Monday, March 14, 2022.

A bit more “subtle,” this second amendment no longer spoke directly about Proof of Work, but also returned to the same de facto ban on Bitcoin with notions of environmental compliance for digital assets:

“(…) cryptocurrencies shall be subject to minimum environmental sustainability standards with respect to their consensus mechanism used to validate transactions.”

From the amendment added to Article 2a of the MiCA Act

And finally this Monday, March 14, the amendment was rejected by a majority of parliamentarians, with 32 votes against the amendment and 24 votes in favor. Fortunately, the worst has been avoided, for now.

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Valentyna Bereza, Team bit4you.