Proof-of-work could be banned in the EU
Bitcoin proponents have been warning of this day, but it may come at last.
On Monday, March 14, the European Union is voting on a proposed legislative framework on digital assets, the so-called Markets in Crypto Assets. As the proposal currently stands, it could limit the use of proof-of-work cryptocurrencies like Bitcoin because of their supposed excessive energy consumption. The proposal should come down to a vote after much bickering over the exact wording and the extent of the “Bitcoin ban” that it would entail.
Previous drafts of the Markets in Crypto Assets (MiCA) bill contained a much stronger limitation of cryptocurrencies that use proof-of-work. After an outcry from the blockchain industry, the wording was first scrapped altogether but then returned in a weaker form. Dr. Stefan Berger, the EU parliamentarian leading the MiCA initiative, said that the most anti-Bitcoin bit of the initiative had been removed. However, the latest version does contain a similar, albeit weaker version of the initial proposal. It reads:
[…] “shall be subject to minimum environmental sustainability standards with respect to their consensus mechanism used for validating transactions, before being issued, offered or admitted to trading in the Union.”
Only “small scale” proof-of-work consensus mechanisms would be exempt from these standards, although what “small scale” means exactly is anyone’s guess. The proposals further says that proof-of-work currencies have to “set up and maintain a phased rollout plan to ensure compliance with such requirements.” How this is supposed to look like for a cryptocurrency like Bitcoin is unclear.
More industry backlash over EU bill
Understandably, the crypto industry is less than amused by such a poorly designed legislative framework. Crypto cold wallet manufacturer Ledger said the following:
“Individuals and organizations should be free to choose the technology most appropriate to their needs. Policymakers should neither impose nor discriminate in favor of a particular technology. This is deeply concerning and would have serious consequences for Europe.”
Pierre Person, a Parisian legislator and member of the Law Commission tweeted that such regulation would have a serious impact on European competitiveness in crypto and that European lawmakers were once again were putting regulation over an opportunity.
Where this could leave the EU
Although EU countries are not the only ones fancying a strong hand against Bitcoin miners – Norway may do the same – they are taking a contrarian position compared to Singapore or Australia. With the “Old World” already having built an unenviable reputation for lots of regulation and little dynamism, one cannot help but wonder if EU lawmakers are being short-sighted here.
Bashing Bitcoin’s energy footprint is easy, but a full-on ban is hardly ever a good solution for a problem. That is even more the case when friendly countries are taking a different approach. To add insult to injury, Europe is already well short of dynamic tech companies, so curtailing one of the main growth sectors won’t help.
The European crypto scene may be in for a tough time in the near future by the looks of it.
