The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has spent the day wrestling with the proposed Markets in Crypto Assets Regulation (MiCA)—a hallmark piece of legislation designed to coordinate the European Union’s approach to crypto.
Today, ECON rejected versions of the legislative package that contained what has been described as a “de facto” ban on proof-of-work cryptocurrency mining, used by cryptocurrencies like Bitcoin and Ethereum.
“There were two alternative compromises that were related to this watered down version of the ban of unsustainable protocols. These kinds of compromises containing this de facto ban of unsustainable mechanisms were rejected,” an unnamed advisor involved in the negotiations told Decrypt on a phone call.
“The proposal that caused all that mobilization will not be part of the [MiCA] text,” the advisor added, referring to the widespread opposition from the crypto-industry to any prospective ban on proof-of-work blockchains.
Make no mistake: if they manage to ban PoW, they'll come for PoS next, & every other sybil resistance mechanism after that.
This isn't just about environmental impact: it's about the right of non-state money to exist. Their strategy is divide & conquer. Let's not fall for it.
— Jake Chervinsky (@jchervinsky) March 14, 2022
The vote to reject language on such a mining ban succeeded by a count of 32 to 23—with six individuals abstaining.
MiCA and crypto mining
The EU’s proposed crypto regulatory framework has been generating controversy for some time now.
Originally, the legislative package included a section that called for proof-of-work blockchains to “meet minimum environmental sustainability standards” to be mined, exchanged, or used within the EU’s borders.
Some EU lawmakers were not happy with the wording, however, and on February 28, the vote was delayed amid fears the package may have been “misinterpreted as a de facto Bitcoin ban,” according to the chairman of the European Parliament’s Economics Committee, Stefan Berger.
Today, EU parliamentarians rejected a further, watered down version—tabled by the European Green Party and seen by Decrypt—to the original text.
“Crypto assets 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,” the revised proposal read.
Proof of work mining and the environment
Proof-of-work crypto mining—used by some of the biggest cryptocurrencies like Bitcoin and Ethereum—has long generated scrutiny from environmentalists.
According to Cambridge University, Bitcoin consumes more electricity per year than most of the world’s countries. Depending on the energy source used, this can translate to a hefty carbon footprint.
Previous research conducted by Decrypt has found that Bitcoin mining’s greenhouse gas emissions are broadly equivalent to 60 billion pounds of burned coal.
“We think it’s not a good thing. We hoped to have something in the legislation that would at least open the debate and our discussion on some measures that could address the environmental impact of crypto assets,” the advisor told Decrypt today.
Meanwhile, Alex de Vries, founder of Digiconomist, told Decrypt that today's vote "probably won’t be the last time we see authorities contemplating how to deal with this. The reality is that the Bitcoin industry has no plans to do anything about it. So these numbers aren’t going to get better by themselves."
What’s next?
So far, ECON has only voted to approve the language of the legislative package itself—not whether or not to approve MiCA.
In any case, even if MiCA gets through ECON, it will then need to be agreed upon following more debate involving the European Commission, as well as the European Council.