Political force in crypto community EU lawmakers vote against PoW ban

The European Parliament’s Economic and Monetary Affairs Committee (ECON) voted against the “de facto” proof-of-work (PoW) ban on Monday morning , local time: 32 votes against, 24 in favor. Member of the European Parliament Stefan Berger confirmed the news on social media, which means that the crypto community has clearly become a political force, and the future of more friendly crypto regulation in the EU region is expected.

Political force in crypto community EU lawmakers vote against PoW ban

Most MEPs representing the European People’s Party (EPP), European Conservatives and Reformers (ERC), Renew Europe (Renew) and Identity and Democracy (ID) groups rejected the clause. The Green Party, Socialist and Democratic Party (S&D) and the Left of the European Parliament (GUE/NGL) support the ban.

background

The previous version of the draft, which proposed to ban proof-of-work (PoW)-based cryptocurrencies in the European Union from January 2025, was later withdrawn amid criticism from the community, but a revised version was reintroduced into the latest draft.

New provisions were added last week to the proposed draft framework for Markets in Crypto Assets (MiCA) (MiCA is the EU’s comprehensive regulatory scheme for managing digital assets), aimed at restricting the use of proof-of-work ( PoW) energy-intensive computing program-driven cryptocurrencies, requiring all cryptocurrencies to comply with the EU’s “Minimum Environmental Sustainability Standards for their Consensus Mechanisms.”

PoW is a consensus mechanism used by cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin. The mechanism requires many computers to work hard to solve complex problems to verify transactions on the network, thereby providing cryptographic rewards to the system that gets the solution fastest, PoW is seen as an effective model for securing the blockchain and preventing bad actors from validating fake transactions.

For mainstream PoW cryptocurrencies such as Bitcoin and Ethereum already traded in the EU, the rule proposes a phase-out plan to move their consensus mechanism from PoW to other methods that use less energy, such as the Proof-of-Stake consensus mechanism ( Proof-of-Stake: PoS).

While ethereum is expected to move to a proof-of-stake consensus mechanism this year, with bitcoin currently unable to complete the switch, if the clause passes, it will be directly affected by the legislation.

The proposal was met with strong opposition from the crypto community.

Such a move would have “catastrophic” effects, predicts former Meta blockchain head David Marcus.

Jake Chervinsky, head of policy at the Blockchain Association, commented ahead of the vote: “MiCA is very bad for cryptocurrencies, worse than anything in the US. Tomorrow (Monday), the European Parliament will discuss ‘environmental sustainability’. Sexuality Standard’, which looks like an excuse, and the subtext is the Bitcoin ban.”

Following the results of the vote, Stefan Berger tweeted to celebrate: “Commission’s first phase victory at MiCA! By accepting my proposal, members paved the way for future-proof cryptocurrency regulation. Now the question is in the final vote Take the whole report and send a strong signal of innovation”.

What’s next?

Patrick Hansen, Head of Strategy and Business Development at Unstoppable Finance, explained that crypto mining is likely to no longer be addressed in the MiCA regulation, but instead added to the EU sustainable finance classification. MiCA regulates financial instruments and financial service providers, and it makes more sense to address any concerns about the sustainability of mining technologies alone.

MEPs approved an alternative amendment proposed by Stefan Berger that would not restrict Bitcoin mining: “By 1 January 2025, the Commission shall submit to the European Parliament and the Council, as appropriate, in accordance with Article 10 of the Regulation Legislative proposals to amend Regulation (EU) 2020/852 with a view to incorporating into the EU Sustainable Finance Taxonomy any crypto-asset mining activities that make a significant contribution to climate change mitigation and adaptation”.

Next, the draft MiCA will go into a “trilogy”, the formal negotiations between the European Commission, Council and Parliament. After they finally reach an agreement (months), the law will go into effect. However, companies will have a 6-month transition period to comply with the requirements.

Hansen pointed out that the anti-Bitcoin coalition of MEPs could still veto MiCA’s fast-track process in a trilogy and bring the discussion to the parliamentary plenary, which would require at least a tenth of the vote to bring discussions around PoW into high-level policy field. So there is still a lot of work to be done in the crypto community in the months and years to come.

As Bitcoin has grown in popularity, controversy has intensified over its energy consumption and environmental impact. The PoW mechanism has been heavily criticized by some regulators and politicians around the world. Some EU leaders are concerned that renewable energy could be used to sustain cryptocurrencies such as bitcoin, rather than by states.

Political force in crypto community EU lawmakers vote against PoW ban

However, according to a report released by the Bitcoin Mining Council (BMC), BTC will only account for 0.38% of the global 50,000TW/h of energy wasted due to inefficiency in 2021, indicating regulators’ concerns about Bitcoin’s energy consumption is grossly exaggerated.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/political-force-in-crypto-community-eu-lawmakers-vote-against-pow-ban/
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