A proposal that would have effectively banned the mining and transactions of energy-intensive cryptocurrencies such as Bitcoin in the European Union failed to win approval by a parliamentary committee, as the bloc pushes ahead with regulation of the fast-growing sector.
The EU’s Economic and Monetary Affairs Committee voted on a final draft of the Markets in Crypto-assets (MiCA) legislation on Monday, which included a clause pledging to make cryptoassets traded or issued within the bloc “subject to minimum environmental sustainability standards.” A final tally of the committee’s voting showed the proposed clause was defeated with 23 votes in favor, 30 against and six abstentions.
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Crypto industry pundits 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 such tokens to improve their carbon footprint in order to comply with the new rules, though. A previous version of MiCA had suggested banning proof-of-work tokens outright.
Ernest Urtasun, shadow rapporteur on the MiCA legislation and a member of the European Parliament within the Greens/EFA political group, said the proposal wasn’t intended to force a ban on “proof of work” tokens like Bitcoin. “It was not as simple as this. Our proposal was more complex and more taking into account the need of the industry to adapt,” he said.
The committee passed a separate proposal to add cryptocurrency mining to the EU’s taxonomy for sustainable finance, which would define whether crypto can be viewed as a sustainable investment. MiCA now needs to be approved by the EU’s executive arm, as well as EU member states and the full European Parliament before it can become law. Bitcoin, Ether and other cryptocurrencies traded flat following the outcome of the vote.
Crypto’s energy consumption is a hotly debated topic. Industry supporters say its impact on the environment can be limited by encouraging miners to use renewable energy sources, but demand for Bitcoin and other tokens has pushed up their carbon footprint significantly in the last year. Data from the Cambridge Centre for Alternative Finance put Bitcoin’s estimated power consumption at an annual rate of 138 terawatt-hours in early 2022, more than the size of a country like Norway.
“Bitcoin won that vote,” said Michael Saylor, chief executive of software company MicroStrategy, during a webinar hosted by the Economic Club of New York on Monday. “You need energy to create real property.”
Markus Ferber, a lawmaker and the EPP Group’s spokesman in the committee, said the failed proposal sent a “clear signal” that the EU wishes to support the crypto industry as it grows.
“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 for new technologies, not banning them.”
–With assistance from David Pan.