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Limiting Proof-Of-Work Crypto Back On The Table As EU Parliament Prepares Virtual Currencies Vote

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ByOnZine Articles

Mar 14, 2022
Limiting Proof-Of-Work Crypto Back On The Table As EU Parliament Prepares Virtual Currencies Vote

A provision that seeks to compel proof-of-work cryptocurrencies such as bitcoin to switch to more environmentally friendly cryptocurrencies. A proof-of-stake consensus mechanism is included in a draught of MiCA that will be voted on by parliament on Monday.

Markets in Crypto Assets (MiCA), the latest draught of the European Union’s (EU) proposed legislative framework for governing virtual currencies, still includes a provision that could limit the use of proof-of-work cryptocurrencies.

The energy-intensive consensus mechanism that underpins popular cryptocurrencies such as bitcoin and ether is known as proof-of-work. The computing process has come under intense scrutiny from EU lawmakers due to energy concerns.

A previous draught of the MiCA framework included a strongly worded provision proposing a ban on crypto services that rely on environmentally unsustainable consensus mechanisms beginning in January 2025. However, due to industry backlash, the provision was later repealed.

Dr. Stefan Berger, the EU parliamentarian in charge of the MiCA legislative framework, stated at the time that the disputed paragraph had been removed, but that a final decision had not yet been made.

A similar provision appears in one version of the new draught, though it has been significantly toned down from the original. It states that “before being issued, offered, or admitted to trading in the Union, crypto-assets shall be subject to minimum environmental sustainability standards with respect to their consensus mechanism used for validating transactions.”

It also states that energy-intensive crypto assets that are already in use in the EU prior to the legislation’s implementation must “set up and maintain a phased rollout plan to ensure compliance with such requirements,” as specified in another section of the framework.

Another version of the bill, seen by CoinDesk, would soften the language even more. However, it is believed that the stronger version has widespread support among legislators. So, while there has been a recent push to use renewable energy in bitcoin mining, the industry is still heavily reliant on traditional energy sources, potentially exposing the cryptocurrency to a stronger proposal.

The crypto community has reacted quickly, with some urging EU citizens to contact their legislators to oppose the measure.

Ledger, a provider of crypto hardware wallets, issued the following statement:

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.

In a lengthy Twitter thread, Pierre Person, a Paris legislator and member of the Law Commission, condemned the newly added language. In it, he discussed the impact of such regulation on European competitiveness in the growing crypto ecosystem.

Although there are plans to transition Ethereum from proof-of-work to a less energy-intensive consensus mechanism known as proof-of-stake, it is unclear how bitcoin, the largest global cryptocurrency by volume traded, could do so.

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OnZine Articles main author - Max Haydon

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