The European Union (EU) is reportedly drafting regulations that could result in a ban on proof-of-work cryptocurrency mining across the union’s 27 member states.
The proposal forms part of the EU’s upcoming Markets in Crypto Assets (MiCA) legislation that will govern the regulation of cryptocurrencies in the EU. Per CoinDesk, a draft MiCA package up for discussion includes a provision that would ban proof-of-work mining in the union.
The news comes amid growing concern across the EU over the environmental impact caused by proof-of-work crypto mining, the energy-intensive consensus mechanism employed by cryptocurrencies including Bitcoin and Ethereum.
European crypto mining concerns
In November last year, Sweden’s financial supervisory authority—Finansinspektionen—called for a ban on crypto mining.
“Sweden needs the renewable energy targeted by crypto asset producers for the climate transition of our essential services, and increased use by miners threatens our ability to meet the Paris Agreement,” the regulator said at the time.
“Energy-intensive mining of crypto assets should therefore be prohibited.”
These same concerns were then seconded by the vice-chair of the European Securities and Markets Authority, Erik Thedeen. Thedeen also serves as director general of Sweden’s Finansinspektionen.
In January, he told the Financial Times that Bitcoin mining had become a “national” issue for Sweden.
“We need to have a discussion about shifting the industry to a more efficient technology. The financial industry and a lot of large institutions are now active in cryptocurrency markets, and they have [environmental, social and governance] responsibilities,” he said.
Bitcoin mining and the environment
According to Cambridge University, the Bitcoin network consumes about 120 terawatt-hours of electricity per year. That is more electricity consumption on an annual basis than most of the world’s countries.
Cambridge University also found (in September 2020) that only 39% of the Bitcoin network was powered by renewable energy. Using these figures, previous research conducted by Decrypt found that the Bitcoin network’s annual greenhouse gas emissions were broadly equivalent to about 60 billion pounds of burned coal.
Yet the concern is now extending beyond the network’s reported lack of renewable energy sources.
Some Bitcoin critics take the same view as Finansinspektionen, arguing that the use of renewable energy to mine cryptocurrency is a severe misallocation of valuable resources.
“I’ve been saying for a long time you cannot sustainably waste resources—using renewables for crypto mining is no solution,” Alex de Vries, founder of Digiconomist, previously told Decrypt.