Bitcoin-Banning Measure Seen Too Close To Call In Tomorrow’s EU Parliament Vote

Bitcoin-Banning Measure Seen Too Close To Call In Tomorrow’s EU Parliament Vote

Bitcoin-Banning Measure Seen Too Close To Call In Tomorrow’s EU Parliament Vote

By Sandali Handagama

Still, people familiar with the matter said a slim majority of parliamentarians could defeat a controversial new MiCA provision that seeks to force proof-of-work cryptocurrencies to shift to more energy-friendly consensus mechanisms.

A proposed rule that could effectively amount to a ban on the leading cryptocurrency bitcoin will be voted on by European Union (EU) parliamentarians Monday with the outcome very much undecided.

The parliament’s economic and monetary affairs committee is set to vote on a draft of the proposed Markets in Crypto Assets (MiCA) framework, the EU’s sweeping legislative package for governing digital assets.

The draft contains a late addition that looks to limit the use of cryptocurrencies powered by an energy-intensive computing process known as proof-of-work. Although the vote is still a close call, a small majority of committee members may vote against the measure, according to people familiar with the matter.

CoinDesk reported yesterday that the provision in question requires all crypto assets to be subject to the EU’s “minimum environmental sustainability standards with respect to their consensus mechanism used for validating transactions, before being issued, offered or admitted to trading in the Union.”

For cryptocurrencies like bitcoin and ether, that are already being traded in the EU, the rule proposes a phase-out plan to shift their consensus mechanism from proof-of-work to other methods that use less energy, like proof-of-stake.

Although there are plans to move ethereum to a proof-of-stake consensus mechanism, it’s unclear whether the same option is available for bitcoin.

The provision was met with swift backlash from the crypto community worldwide.

“Extremely high stakes vote in the EU. That such a proposal made it this far is extraordinarily concerning and unlikely to stand up to practical reality,” said Jeremy Allaire, founder of Circle Pay, on Twitter.

A number of EU parliamentarians have been pushing to ban proof-of-work cryptocurrencies over energy concerns, even if the energy in question were to be renewable. They fear that renewable energy could be channeled into proof-of-work computing rather than the national grid destined for public use.

A previous version of the provision proposed the prohibition of proof-of-work crypto in the EU starting in January 2025. The provision was later dropped following criticism from crypto advocates, before the modified version made it back into the latest draft.

Stefan Berger, the EU parliamentarian charged with overseeing the content and progress of the MiCA framework, has been trying to reach a compromise over restricting proof-of-work.

“The Greens and Socialists, as you can imagine, are criticizing the proof-of-work concept and criticizing the energy use, saying that bitcoin needs more energy than the Netherlands,” Berger said in an interview with CoinDesk in February, referring to the political parties pushing the energy argument.

Berger also said at the time that he does not feel MiCA is the place for settling technological or energy-related rules because the framework’s goal is to regulate crypto as assets.

Once parliament decides on the draft, it will move on to a trilogue, which is a formal round of negotiations between the European commission, council and parliament.

 

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29 Sep 22
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