The European Parliament has voted against a legal framework that would have seen restrictions applied to cryptocurrencies mined through energy-intensive Proof of Work (PoW) processes on the blockchain, most notably, Bitcoin.
What happened: Yesterday, members of the economic and monetary affairs committee struck down the provision to ban PoW mining across all 27 member nations in a vote of 32-24.
- The EU’s Markets in Crypto-Assets (MiCA) framework is a regulatory package governing cryptocurrencies and other digital assets.
- Lawmakers approved a version of the regulation that does not limit PoW mining, something critics have called for to reduce emissions that contribute to climate change.
- Stefan Berger, an EU parliament member, tweeted that this vote was a step towards paving “the way for future-oriented crypto regulation.”
The package approved by lawmakers had as its top priority “ensuring that the EU financial services regulatory framework is innovation-friendly and does not pose obstacles to the application of new technologies.”
PoW vs PoS: Proof of Work (POW) uses a large amount of computing power to create a “new” block to validate transactions. This process is used by Bitcoin and Ethereum, two apex cryptocurrencies.
Proof of Stake (PoS) employs a network of “validators” who stake their crypto for the chance to validate a new transaction, add to the blockchain, and earn more crypto. Solana, Cardano and the ETH2 blockchain all employ PoS.
Why it matters: This vote was very close, highlighting the growing debate surrounding the regulation of cryptocurrencies and environmental impacts of mining, particularly in Europe where environmental sustainability is a “key sticking point” to crypto adoption.
- Bitcoin mining has been pushing its way further into renewable energies because it is more cost-effective and looks good from an ecological standpoint. Still, it seems nearly impossible to transition Bitcoin to a PoS model.
- The approved draft of the EU’s regulation says that crypto assets “shall be subject to minimum environmental sustainability standards with respect to their consensus mechanism used for validating transactions.”
