EU proposal to ban proof-of-work crypto fails vote

The proposed Markets in Crypto Assets (MiCA) framework, which aims to regulate crypto-assets while supporting sustainable innovation and fair competition, fails to win the approval of the European Union Parliament on Monday. The vote of the Economic and Monetary Affairs Committee was 30 against, 23 in favor, and 6 abstains. Introduced in 2020, among the provisions of the MiCA legislation would have included prohibiting proof-of-work (PoW) cryptocurrencies such as Bitcoin and Ether.

PoW cryptocurrencies have stirred concerns not only in terms of financial regulation, but also on its environmental impact. The Cambridge Bitcoin Electricity Consumption Index notes that 0.60 percent of the world’s electric consumption was made by Bitcoin, greater than the energy required to run global gold mining. Bitcoin also reportedly consumes more energy than the entire national consumption of either Norway or Ukraine.

Ernest Urtasun, shadow rapporteur on the MiCA legislation and a member of the European Parliament within the Greens/EFA political group, said the proposal was not intended to force a ban on PoW tokens, which timetable of implementation was supposed to take effect only by 2025.

“It was not as simple as this. Our proposal was more complex and more taking into account the need of the industry to adapt,” he said. The basic taxonomy in the proposal is as follows:

• payment tokens (means of exchange or payment)
• investment tokens (have profit rights attached)
• utility tokens (enable access to a specific product or service)

Banning cryptocurrencies, however, did not seem to affect its overall electricity consumption in the global scale. For instance, the prohibition in the People’s Republic of China reportedly helped accelerate the shift of crypto operations in the United States and Kazakhstan, two of the largest countries in terms of global hashrate share. Statista shows that Bitcoin consumption still increased by 5 percent worldwide since the Chinese ban on crypto transactions.

“Individuals and organisations should be free to choose the technology most appropriate to their needs,” a statement from the crypto wallet provider Ledger read, “Policymakers should neither impose nor discriminate in favour of a particular technology. This is deeply concerning and would have serious consequences for Europe.”

Nonetheless, the committee has voted to advance the MiCA without the explicit language on proof-of-work mining of crypto-assets, clearing the way for the draft to be negotiated in the “trilogue” meeting. The draft rules has received 31 votes in favor, 23 abstains, and 4 against. A decision to enter into negotiations with EU governments on the final shape of the bill was adopted with 33 votes to 25.

Source: Yugatech