The Commission for Economic Policy (ECON) of the European Parliament voted against a proposed Proof-of-Work (PoW) ban on cryptocurrency mining. The bill was part of the Markets in Crypto Assets (MiCA) framework that aims to create a comprehensive foundation for crypto regulation in the EU.
This is a great relief and political success for the Bitcoin, Ethereum and cryptocurrency mining community in the European Union. The majority of MEPs from the EPP, ECR, Renew and ID voted against it, while a minority of MEPs from Greens, S&D and GUE voted in favor. Instead, Stefan Berger’s alternative amendment was supported.
Proof-of-Work ban – the European alternative
What does this mean for cryptocurrency PoW mining? While mining will most likely no longer be included in Markets in Crypto Assets (MiCA), it will be added to the EU’s sustainable finance taxonomy. According to the European Union, MiCA aims to “harmonize the European framework for the issuance and trading of different types of cryptocurrency tokens as part of a European digital financing strategy.” The regulation proposes an overarching legal framework for assets, markets and service providers. All of these elements are currently not regulated at the EU level. In addition, MiCA regulates financial instruments and financial service providers. It makes much more sense to address any concerns about the sustainability of mining technologies separately.
On 7 March, Stefan Berger submitted a new proposal to the ECON committee of the European Parliament. In it, he proposed to remove from the MiCA regulation any PoW judgment. Instead, he wanted cryptocurrencies to be added to the EU taxonomy. The EU taxonomy is a classification system that creates a list of environmentally (un)sustainable economic activities. It provides companies, investors and policy makers with definitions for which economic activities can be considered sustainable.
ECON-Ausschuss hat meinen #MiCA-Bericht angenommen. Ein guter Tag für den Krypto-Sektor! Das EU-Parlament hat den Weg geebnet für eine innovationsfreundliche Krypto-Regulierung, die weltweit Maßstäbe setzen kann. Der Prozess ist noch nicht vorbei; Schritte liegen noch vor uns /1
— Stefan Berger (@DrStefanBerger) March 14, 2022
What does this mean for Bitcoin, Ethereum and PoW? If PoW were deemed unsustainable according to the taxonomy, it would be much harder for mining companies to get money from European investors, companies and governments that need to allocate more and more of their capital to environmental causes. In short, removing PoW from the MiCA is a huge improvement for the cryptocurrency community compared to the previous compromise draft directly banning PoW.
What’s next for crypto mining in Europe?
The MiCA project will be negotiated in so-called trilateral talks between the EU Commission, Parliament and Council. Once they are finally agreed (within a few months), the law will enter into force. However, companies will have a 6-month transition period to comply. There is still a chance that the Proof-of-Work ban in Europe will return. The groups that lost the vote have one last option. They can veto the fast-track MiCA and move the discussion to the European Parliament. To do so, they need 1/10 of the EP votes they have. This would move the PoW discussion into the high-level policy arena. The outcome of these debates is difficult to predict.
Even beyond the MiCA regulation, the discussion of PoW regulation is far from over. It will be revisited in the context of the sustainability taxonomy or in the upcoming data center regulation. There is still a lot of work ahead for the cryptocurrency community in Europe in the coming months and years. However, today is a great political success for cryptocurrencies in the European Union. The cryptocurrency community in the EU has clearly become a political force!
