Substantial changes may be arriving soon
The European Union’s Economic and Monetary Affairs Committee on Monday voted against a contentious provision in the draft proposal of the Markets in Crypto Assets (MiCA) framework that would effectively have banned proof of work (POW) along with the cryptocurrencies using this consensus mechanism, which includes Bitcoin among others.
The original proposal in MiCA sought to ban any cryptocurrency that relied on “environmentally unsustainable consensus mechanisms”, starting in January 2025. But the proposal was later scrapped and toned down to suggest “minimum environmental sustainability standards with respect to their consensus mechanism used for validating transactions.”
While it didn’t call for an outright ban on mining, crypto pundits said the “sustainability standards” mentioned in the proposal would have meant that any cryptocurrency using POW as a consensus mechanism would have been deemed illegal, including Bitcoin and Ethereum.
On Monday, the committee turned down this latest amendment, opting instead for EU Parliament member Stefan Berger’s version, which reads:
“By 1 January 2025, the Commission shall present to the European Parliament and to the Council, as appropriate, a legislative proposal to amend Regulation (EU) 2020/852, in accordance with Article 10 of that Regulation, with a view to including in the EU sustainable finance taxonomy any crypto-asset mining activities that contribute substantially to climate change mitigation and adaptation.”
The ban on proof of work has been abandoned, for now. Instead, cryptocurrencies may be added to the EU taxonomy for sustainable activities. As Patrick Hansen, head of strategy at Unstoppable DeFi, says on Twitter, cryptocurrency mining will likely no longer fall under the jurisdiction of MiCA regulation, but will rather be addressed under the EU’s taxonomy regulation.
It is the official name of the EU’s taxonomy regulation, which was created to establish a framework that facilitates sustainable investment by creating a list of environmentally sustainable economic activities.
The Markets in Crypto Assets is a framework for regulating digital assets, including cryptocurrencies, in the EU. The vote on Monday was to move forward with this legislative framework.
Regulators have in the past expressed their worries about the proof of work consensus protocol and its supposed high power usage. With this proposal, the EU wanted to force the hand of players in the crypto industry by essentially telling them to either change their consensus mechanisms or stay out of the EU.
This would have had dire consequences for innovation in the EU block, as Markus Ferber, EPP Group’s spokesperson in the committee, explained. “Banning proof of work would have meant for the EU to become crypto no man’s land,” Ferber said. “If we want to foster innovation, we should be open to new technologies, not banning them.”
Crypto miners have in recent years looked to renewable energy to significantly cut down on energy use, and the technology in mining rigs has also greatly improved to become more energy efficient.
Before it can become law, the MiCA legislation must now head to the EU’s executive arm, where, if approved, the EU member states en EU parliament must also give it their stamp of approval.
“By adopting the MiCA report, the European Parliament has paved the way for an innovation-friendly crypto-regulation that can set standards worldwide,” said Berger. “The regulation being created is pioneering in terms of innovation, consumer protection, legal certainty and the establishment of reliable supervisory structures in the field of crypto-assets. Many countries around the world will now take a close look at MiCA.”
“Bitcoin won that vote,” said Michael Saylor, CEO of MicroStrategy, but it’s far from over. As Hansen explains, the groups that lost the vote can veto a fast-track procedure of MiCA to bring the discussion back in front of Parliament.
As nations around the world are preparing their own legislative frameworks to facilitate cryptocurrencies and digital assets, it will be interesting to see how the governing body in one of the top regions for cryptocurrency use responds.
