- Language aimed at banning proof-of-work coins on the continent is conspicuously absent.
- The bill continues to say that cryptoassets “must meet minimum environmental sustainability standards,” Unstoppable Finance’s head of growth tweeted.
The final version of a major bill in the EU, which has sparked controversy over its targeting a Proof-of-Work (PoW) consensus mechanism in the crypto industry, is expected to be put to a vote on Monday.
The Crypto Asset Markets Bill (MiCA), introduced in 2020, aims to tighten regulation of digital assets by establishing a licensing regime across the continent and streamlining a single set of rules for member states.
These rules include transparency and disclosure requirements for the issuance of digital assets, authorization and supervision of crypto asset service providers, consumer protection rules, and measures to prevent market abuse.
The bill, under paragraph 61(9c), also previously sought to establish a framework to prevent crypto services from using PoW-based cryptocurrencies such as bitcoin and ether. This section of the legislation, which has since been updated, is expected to come into effect sometime in 2025.
Lawmakers and environmental activists have been pushing for the regulation of crypto mining since at least last November, citing what they see as energy-intensive crypto-related activity associated with PoW.
Following significant public outcry and condemnation of the bill for potentially stifling financial innovation in the region, the rule was put on hold indefinitely on February 28.
“Given the important sustainability debate, I propose that crypto assets, like all other financial products, be included in the scope of the taxonomy,” he tweeted. Stefan BergerMEP for Germany, on Tuesday.
“An independent discussion of Proof-of-Work in MiCA is no longer planned.”
Berger has been tasked with overseeing the bill and presented the final bill last week.
In order for legislation to be passed within the EU, the Parliament, representing the citizens of Europe, and the Council, representing the governments of the 27 EU member states, must agree on the identical text of this bill. This process is often time consuming and prone to failure, as each member has a roughly equal say on issues affecting the region as a whole.
Some observers remain cautious as the document continues to say that cryptoassets “should meet minimum environmental sustainability standards,” Patrick Hansen, head of growth at Unstoppable Finance, noted in a tweet on Sunday.
Hansen states that while the wording regarding PoW has changed, “the effect is essentially the same.”
Existing cryptocurrencies “should develop and maintain a phased rollout plan to ensure compliance with such requirements,” Hansen tweeted, quoting parts of the draft document.
“Because bitcoin cannot and will not implement a PoW rollout plan, this will also affect bitcoin.”
The Bitcoin network is highly decentralized, driven by a social consensus formed by a multitude of around 15,000 full node operators and miners. Changing the Proof-of-Work consensus mechanism, while theoretically possible, is highly unlikely; PoW, as described in the Bitcoin white paper, is regarded in the Bitcoin community as a typical feature responsible for the security of transactions on the network. An alternative without it—like several controversial hard forks in the past—would simply not be considered “Bitcoin.”
The moderately more cryptographically friendly language in the current version of MiCA, which is likely not to be adopted by committee vote, is a notable improvement over the original, which Hansen previously described as a “suicidal suggestion”.
“This will kill the entire European crypto industry, the only sector that is fully in line with European values and where the EU can really be competitive.”
In defense of PoW mining from a sustainability perspective, CoinShares CEO Jean-Marie Monietti points to internal research which concludes that “the potential of miners to reduce the carbon footprint of flared and vented natural gas … is sufficient to fully offset all emissions or even have a positive impact on net emissions.”
Monetti says imposing a ban on mining in Europe would hurt the bloc’s environmental goals.
The worst thing Western governments can do about capping the carbon footprint of bitcoin mining is to force them out of their jurisdiction. (13/23)
— Jean-Marie Mognetti (J2M) (@jmmognetti) March 13, 2022
The MiCA is currently being voted on by the Economic and Monetary Affairs Committee (ECON) before it can be considered in a trilogue meeting, Berger said, referring to tripartite meetings between representatives of the EU Parliament, the Council and the European Commission, the EU. executive power.
“Through MiCA, the EU can set global standards,” Berger said. “The strong support for MiCA is a strong signal from the EU Parliament for a technology-neutral and innovation-friendly financial sector.”
Update March 14, 2022 11:14 AM ET:
The ECON committee voted to move MiCA forward without explicit proof-of-work crypto asset mining, clearing the way for the project to be discussed at the trilogue meeting, according to Patrick Hansen as well as Blockchain for European industry interest group based in Brussels.
McAuley Peterson provided reporting for this story.
Get the most important news and ideas about cryptocurrencies in your inbox every evening. Sign up for the free Blockworks newsletter now.
Sebastian Sinclair
Blockworth
Senior Reporter, Asia News Desk
Sebastian Sinclair is a senior news reporter for Blockworks based in Southeast Asia. He has experience covering the cryptocurrency market as well as certain events affecting the industry including regulation, business and M&A. He currently does not own cryptocurrencies. Contact Sebastian by email at [email protected]
