Continuing the global trend to push for stricter crypto regulation, European regulators are looking into banning proof-of-work mining.
Proof of work to be outlawed in the EU?
Cryptocurrencies have had anything but an easy start to 2022. With macroeconomic uncertainty and rising inflation weighing heavy on prices, investors are already more jittery than normal in a volatile market. To make matters worse, proof-of-work coins may now be facing the wrath of regulators looking to crack down on them.
First, there was Norway announcing that a ban on Bitcoin mining may be on the cards. Next, Kosovo announced that Bitcoin mining was putting too much strain on the country’s infrastructure and that a ban was imminent. Now, the European Union may be looking to do something similar.
Erik Thedéen, the vice-chair of the European Securities and Markets Authority, said that the use of renewable energy for Bitcoin mining was concerning and warned that cryptocurrencies could be a risk to climate change goals. Calling upon European regulators to take action against proof-of-work mining, he outlined the advantages of proof-of-stake, saying that there needed to be a discussion about shifting the industry to more efficient technology.
How reasonable is the mining FUD?
Miners are not faced with this kind of FUD (fear, uncertainty, and doubt) for the first time.
Melanion Capital, a Paris-based alternative investment firm, already addressed calls for a ban back in November, calling the requests “completely misinformed.” Although Bitcoin did not have a lobby or a group that was defending its interests, the investment firm called for restraint when considering regulatory measures, saying that the industry should not be made illegal “for its lack of defensive powers.”
However, politicians are not the only ones to chip in on mining. Several influential figures – in the Bitcoin space but necessarily from the Bitcoin space – have also voiced their opinions.
Elon Musk, whose company famously discontinued accepting Bitcoin over energy consumption concerns, said that Tesla may reconsider adding Bitcoin as a payment option if 50% of the network’s energy were to come from renewables. Jack Dorsey and Michael Saylor have also weighed in, voicing their support for the Bitcoin network despite concerns over proof-of-work.
China mining ban helping Bitcoin
Curiously, though, the biggest positive influence on the Bitcoin network has come not from influencers or Western politicians, but from China.
Last year’s mining ban disintegrated the hitherto centralised Bitcoin mining industry, driving miners out of China and towards the US, Kazakhstan, and several other countries. It has also helped with moving towards more renewable energy use. According to a report, the Bitcoin network is now using more than 58% of renewables in its energy mix, which coincidentally would fulfil Musk’s quota to add it back on Tesla’s payment menu.
Whether Tesla re-adds Bitcoin or not remains to be soon, but it seems all but certain that Bitcoin miners will continue to face questions from regulators over climate change concerns. Rightly or wrongly, this may turn out to be Bitcoin’s Achilles heel and a problem the network urgently needs to address.
