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EU To Vote on Proof of Work, Bitcoin Mining Ban

The future of Bitcoin mining in the European Union may hinge on today’s pivotal vote in the EU Parliament.

The EU Parliament’s Committee on Economic and Monetary Affairs (ECON) is voting on the proposed Markets in Crypto Assets (MiCA) regulation draft.

The proposed regulation is taking aim at crypto mining, due to concerns over its impact on the environment. In particular, the latest MiCA draft aims to limit the use of cryptos powered by the Proof of Work (PoW) mechanism.

If approved, the regulation will require all crypto assets to be subject to the EU’s “minimum environmental sustainability standards”. This means that regulation will push crypto to shift their consensus mechanism from PoW to the Proof of Stake (PoS) standard.

Parliamentarians are skeptical towards Bitcoin mining, including members of the Economic and Monetary Committee. One member of the committee, Stefan Berger, submitted the proposed regulation draft a week ago.

Today I submitted the final MiCA draft. The ECON committee will vote on this on March 14, 2022.

Berger himself is a Bitcoin mining skeptic. However, he claims that MiCA’s goal is to regulate crypto assets, not to set rules on the technology they can use. However, other politicians have different views.

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.

What if the EU Bans Mining?

Earlier, the top European regulator also called for a ban on crypto mining. Vice-chair of the European Securities and Markets Authority Erik Thedéen said that crypto mining is a huge issue for Europe.

The solution is to ban proof of work. Proof of stake has a significantly lower energy profile.

Thedéen claimed that he is not against crypto as such. However, he insists to make cryptos more sustainable.

The solution is to ban proof of work. Proof of stake has a significantly lower energy profile.

The proposed regulation will likely impact all miners in the EU. It will also impact the crypto industry as a whole, as it relates to the largest crypto assets. Bitcoin and Ethereum both rely on the PoW model. While the Ethereum community is scheduled to shift towards PoS, there are no such plans for Bitcoin.

In fact, Bitcoin mining is a huge global industry. Miners in the EU contribute 12-14% of BTC’s global hashing power. If mining becomes illegal in the EU, they will have to move elsewhere. Likely destinations are Kazakhstan and the U.S., where Chinese miners moved after their county’s crackdown on mining. Miners might also move to Russia, but sanctions against the country might complicate that move.

PoS vs PoW

Proof of work relies on computing power to solve complex equations required to write transactions on the blockchain. This process, also called mining, requires a lot of energy. The mechanism helps secure the network from malicious attacks. In turn, miners get mining rewards for their efforts.

Instead of mining, PoS uses staking as a way to validate transactions. Validators have to put up some cryptocurrency to validate transactions. If they don’t approve the right transactions, their stake is “slashed,” or taken away.

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Although there are plans to move Ethereum to the PoS mechanism with its new 2.0 upgrade, Bitcoin’s transition is highly unlikely.

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