EU to vote on whether to restrict proof-of-work (POW) -based cryptocurrencies

A provision aimed at forcing proof-of-work cryptocurrencies such as bitcoin to switch to greener proof-of-stake-based consensus mechanisms (POS) was included in the draft MiCA for parliamentary vote on Monday.

The latest draft of the European Union’s (EU) proposed legislative framework to govern virtual currencies, known as Markets in Crypto Assets (MiCA), contains a provision that could limit the use of proof-of-work cryptocurrencies.

Popular Science: (POW) Proof of Work is an energy-intensive consensus mechanism that underlies popular cryptocurrencies like Bitcoin and Ethereum.

The calculation process has come under heavy scrutiny from EU lawmakers due to energy concerns, and a previous draft of the MiCA framework contained a strongly worded clause proposing a ban on cryptocurrency services with POW consensus mechanisms from January 2025.

EU MP Dr Stefan Berger, who is in charge of the legislative framework for MiCA, said at the time that the paragraph in question had been removed, but no final decision had been made.

The new draft has a similar provision, saying that cryptoassets “should meet minimum environmental sustainability standards by the consensus mechanisms used to verify transactions before they are issued, offered, or permitted to be traded in a consortium.”

Under the provision, a proof-of-work consensus mechanism is exempt from meeting sustainability criteria if it operates on a small scale. What qualifies as a small-scale operation? Still to be determined.

Energy-intensive cryptoassets already in use in the EU before the legislation came into force will have to “establish and maintain a phased rollout plan to ensure compliance with these requirements,” another part of the framework stipulates.

While there are plans to move ethereum from proof-of-work (POW) to a less energy-intensive consensus mechanism called proof-of-stake (POS), it’s unclear how bitcoin, the world’s most traded cryptocurrency, could make the transition from proof-of-work. So while there has been a huge push recently, there is a desire to use renewable energy in Bitcoin mining.

The cryptocurrency community has reacted quickly, with some calling on EU citizens to contact their MPs to oppose the measure. Hardware wallet provider Ledger issued a statement saying:

“Individuals and organisations should be free to choose the technology that best suits their needs. Policymakers should neither impose nor discriminate against a technology. This is deeply concerning and will have serious implications for Europe.”

Paris-based lawmaker and law council member Pierre Person took to Twitter to denounce the new additions. In it, he talks about the impact such a regulation will have on Europe’s competitiveness in the growing cryptocurrency ecosystem.

EU to vote on whether to restrict proof-of-work (POW) -based cryptocurrencies

EU to vote on whether to restrict proof-of-work (POW) -based cryptocurrencies

EU to vote on whether to restrict proof-of-work (POW) -based cryptocurrencies

The translation is as follows:

(1/9) MiCa regulations will be voted on next Monday. As it stands, it unequivocally condemns the future of crypto assets in Europe. By banning Bitcoin and Ethereum, complicating the use of NFTs and DeFi, the European Parliament is staking our monetary and financial sovereignty.

(2/9) MiCa is a major breakthrough in the principle of technology neutrality. MiCa prohibits the issuance or exchange of cryptoassets that rely on proof-of-work protocols. This led to a fatal decision to exclude bitcoin and ether from Europe.

(3/9) If each of us has to defend a more ecological and benign society, but banning PoW is a simplistic and comical view. It amounts to banning an activity that does not exist on European soil – mining.

(4/9) The problem is not the energy consumption of Bitcoin, but the source of this energy. If mining from fossil fuels could be banned, it would make more sense to promote mining that uses renewable energy.

(5/9) MiCa also refers to NFTs. NFTs that are not listed on exchanges are considered outside the scope of crypto assets. So the NFT representation of a sword in a video game would be managed in the same way as an asset by market authorities.

(6/9) The EU is condemning the development of our companies, imposing a regulation that is out of touch with their activities. NFT is a technical standard, and its bottom layer should be the object of supervision. Do we regulate TCP/IP?

(7/9) Whether it is DeFi or NFT, these technologies are still in the early stages of development. We are going to regulate future use cases, not technology. Parliament is porting old world financial regulation to a new technology with a different structure.

8/9) European Parliament takes a tough stance on crypto assets, arguing that they are protecting citizens. In fact, this version is insane to our competitiveness, and at the same time, President Biden has signed a bill calling on the United States to fully embrace this new ecosystem.

(9/9) Once again we have defied history. We leave the opportunity to others, but we pride ourselves on having a good statute. If this text is passed as is, we will pay a price in terms of the competitiveness of the industry and the interests of European citizens.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/eu-to-vote-on-whether-to-restrict-proof-of-work-pow-based-cryptocurrencies/
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