The Crypto Asset Markets (MiCA) legislation included a clause committing that crypto-assets traded or issued within the bloc would be “subject to minimum standards of environmental sustainability.”
A proposal that would have effectively banned the mining and trading of energy-intensive cryptocurrencies such as Bitcoin in the European Union has not been approved by a parliamentary committee, as the bloc pursues regulation of the sector fast growing.
The EU’s Economic and Monetary Affairs Committee on Monday voted on final draft legislation on crypto-asset markets (MiCA), which included a clause committing crypto-assets to be traded or issued within of the block “subject to minimum standards of environmental sustainability”. A final count of the committee’s votes showed the proposed clause was defeated with 23 votes in favor, 30 against and six abstentions.
Crypto industry experts said the proposal would have acted as a de facto ban on cryptocurrencies such as Bitcoin and Ether, which operate using a “proof-of-work” consensus mechanism and require large amounts of energy to mint tokens and record transactions. The proposal had promised to allow time for these tokens to improve their carbon footprint in order to comply with the new rules, however. A previous version of MiCA suggested banning proof-of-work tokens altogether.
Ernest Urtasun, shadow rapporteur on the MiCA legislation and Member of the European Parliament in the Greens/EFA political group, said the proposal was not intended to force a ban on “proof of work” tokens like Bitcoin. “It wasn’t that simple. Our proposal was more complex and took more into account the industry’s need for adaptation,” he said.
The committee adopted a separate proposal to add cryptocurrency mining to the EU taxonomy for sustainable finance, which would define whether crypto can be considered a sustainable investment. The MiCA must now be approved by the executive arm of the EU, as well as EU member states and the full European Parliament before it can become law. Bitcoin, Ether and other cryptocurrencies traded flat after the vote result.
Crypto’s power consumption is a hotly debated topic. Supporters of the industry say its environmental impact can be limited by encouraging miners to use renewable energy sources, but demand for Bitcoin and other tokens has dramatically increased their carbon footprint over the last year. Data from the Cambridge Center for Alternative Finance puts Bitcoin’s estimated energy consumption at an annual rate of 138 terawatt hours at the start of 2022, more than the size of a country like Norway.
“Bitcoin won that vote,” said Michael Saylor, chief executive of software firm MicroStrategy, during a webinar hosted by the Economic Club of New York on Monday. “You need energy to create real estate.”
Markus Ferber, lawmaker and EPP Group spokesperson on the committee, said the rejected proposal sends a “clear signal” that the EU wants to support the crypto industry as it grows.
“Banning ‘proof of work’ would have meant that the EU would become a crypto no man’s land,” Ferber said. “If we want to foster innovation, we must be open to new technologies, not ban them.”
–With the help of David Pan.