The European Parliament has voted against a draft regulation aimed at banning Proof-of-Work (PoW) cryptocurrencies in the EU over concerns about mining's carbon footprint. Bitcoin (BTC) and Ethereum (ETH) are the two largest cryptocurrencies currently using mining for network consensus.
Proponents of crypto say the argument misses the point, especially with Bitcoin increasingly using renewable energy sources. Even the carbon footprint of BTC mining across the EU is negligible compared to other sectors.
The vote, held Monday afternoon by the European Parliament's Committee on Economic and Monetary Affairs (ECON), was 32 to 24 against the proposal. The committee instead passed a draft regulation that added Bitcoin to the EU taxonomy for sustainable finance.
The possible ban was part of a larger framework of rules known as the Markets in Crypto-Assets (MiCA) framework. In practice, it simply means more rules for the bitcoin market in Europe.
A relief for the market
The vote against a ban comes as a huge relief to the cryptocurrency industry. Representatives previously warned of the threat of a hardline scenario.
MiCA is a regulatory framework containing 126 articles. It also contains a detailed plan for the implementation of these regulations for the EU and the Member States
Patrick Hansen, head of strategy and business development at DeFi platform Unstoppable Finance, called this a "big relief and political success for the bitcoin and crypto community in the EU."
“MiCA regulates financial instruments and financial service providers. It makes much more sense to address any concerns about the sustainability of mining technology separately," said Hansen.
According to Hansen, the MiCA design will go through a negotiation phase of "trilogues" that will probably last about two months. As a result, the European Commission, Parliament and Council will all consider the regulation.
The bill then becomes law, with companies having up to six months to comply. This leading to a ban on Bitcoin is unlikely, however, according to the strategist.
“The groups that have lost the vote have one last option. They could veto an accelerated procedure of MiCA through the trilogues and take the discussion to Parliament's plenary. They need 1/10 of the EP's votes to do that, and they have," he noted. But while this move may still not change the mood, it doesn't mean PoW can't be discussed outside of MiCA regulation.
Strategy
The design was introduced by the European Commission in 2020. This is part of the digital financing strategy. The MiCA covers a wide range of crypto topics, such as the status of all major currencies and stable coins. It also covers the activities of mining and exchange platforms.
There are also some notable exclusions. For example, for digital currencies issued by central banks. Such as CBDC, security tokens, NFT and DeFi.
Voting on the type of design
The meeting has an important agenda item; votes could be cast on 2 different versions of the design. One of the versions contains a language that can prohibit all crypto transactions on the PoW protocol. This rule comes together with an obligation for providers.
Detailed plans of their compliance with environmental and sustainability standards have to be submitted. In the case of Bitcoin, these details cannot be provided.
Detailed plan
Submitting a detailed plan also applies to some other decentralized systems. This is because there is no central operator or individual or collective decision-making.
For this reason, the version has already been corrected before. This is to be able to break such a regulatory impasse.
Final MiCa version
Finally, the final version of the MiCa is presented. However, it is not supported by the majority of MEPs.
Patrick Hansen reports that 32 members of the ECON committee are voting against the restrictive version. The Head of Strategy at Unstoppable Finance says only 24 people vote in favour.
This minority consists of the left-wing parties. They are mainly members of the green group.
No ban on mining with PoW
The more moderate version of the MiCa is now making its way to the EU institutions. It contains no direct or implied prohibition against mining using PoW.
All mining activities related to crypto assets in the EU tax base for sustainable finance must be included.
Excluded from aid
Crypto mining can still be categorized as an unsustainable activity until 2025. It can still be excluded from investment by companies and governments.
However, this is still a long way from a total ban. Its issuance could drastically change the state of cryptocurrencies in Europe.
The next step for the MiCa is a triple treatment. By the European Parliament, the European Commission, and the Council of the European Union.