Extraction of cryptocurrency with Proof of Work (PoW) will not be banned in the EU – at least this year. That is the conclusion of last week’s committee vote in the European Parliament.
A last-minute change from a private coalition of Social Democrats and Greens will effectively ban Proof of Work mining, the kind of consensus mechanism used by local cryptocurrencies such as Bitcoin (BTC) and Ether (ETH). – Has strongly denied. The crypto community can breathe a sigh of relief, but some still worry that the industry’s problem with power-hungry consensus protocols remains.
“My first reaction to the CEMAC vote was a sigh of relief,” Joshua Elul, director of the Center for Distributed Ledger Technology and senior lecturer at the University of Malta, told Cointelegraph, adding:
“This is definitely a sign that crypto- and distributed ledger technology is no longer a place where technicians, investors, hobbyists and idealists come together – it is a technology that is not going anywhere.”
But Elul also believes that society should not rest after last week’s victory. Miners supporting blockchain PoW projects must “explore renewable energy” not only in anticipation of other potential regulatory actions, but also to reduce their carbon emissions.
The committee vote was part of the ongoing process for cryptocurrency markets (MiCA) in the EU to ensure coordination, clarity and regulation of the European cryptocurrency markets.
“In all likelihood, the actual change of the PoW ban would not have been transferred to the final MiCA agreement,” Patrick Hansen, strategy director at crypto firm Unstoppable Finance, told Cointelegraph. But that does not mean that energy wasting and carbon footprint are dead problems. Hansen added:
“The macro environment – Ukraine, inflation, etc. – is changing rapidly, and reducing energy consumption may soon become an absolute political priority.”
wake up crying?
“This is good news for the crypto sector,” said Yu Xiong, professor of business intelligence and director of the Center for Innovation and Marketing at the University of Surrey, about the vote in the European Parliament committee. This is another sign that cryptocurrency and blockchain technology are widely accepted by the public, but it definitely also serves as a warning to miners using Proof of Work. Prepare for the shift because no one can predict whether there will be a new vote like this in the future. “”.
He added that Ethereum “hopefully” succeeds in moving to an environmentally friendly Proof of Stake (PoS) consensus mechanism later this year. Otherwise, the vote gives time to other projects that use evidence of work to do their own transformation to reduce energy consumption and carbon emissions.
Like some of the other active participants in the crypto space, Xiong believes that informed regulation – such as MiCA he will propose – will be a general plus for the crypto industry. Or, as EPP spokesman Marcus Ferber recently put it:
“Crypto-asset markets have been like the Wild West for far too long and need a European mayor […] The new rules for cryptocurrency will fill the current vacuum in regulation by creating a clear framework for protecting investors and ensuring market integrity.”
Overall, the 32-24 vote to reject the amendment was prompted by some concern in the crypto community. “The situation with MiCA is worse for cryptocurrencies than anything else in the United States,” said Blockchain Association Policy Chair Jake Czerwinski, who said the change appeared to be “an excuse to ban bitcoin.” Meanwhile, Jean-Marie Monetti, CEO of CoinShares, called the proposal to ban Proof of Work protocols “more than bad news”, but “a ruthless and boring proposal that does not reflect the reality of the industry and its future.”
Soon part of Europe’s sustainable “ranking”
In addition to fighting against the changes, the ECON Committee also asked the European Commission to include cryptocurrency mining in the EU classification – a classification system – for sustainable activity by 1 January 2025. The EU will then decide whether cryptocurrency mining can be classified as a “sustainable” activity. If European institutional investors and other investors prove unsustainable, they may be tempted to pay more attention to the crypto sector.
Hansen recently explained that “assessments have a huge impact on where [companies, investors and governments] can place their money and subsidies.” And the more laws related to environmental protection that are issued, the greater this effect will be. Meanwhile, he added that PoW crypto mining can probably be listed as “unsustainable” according to the assessment.