On Wednesday, German media outlet BTC-ECHO reported that the European Parliament (a legislative branch of the European Union) finalized a new draft of their Markets in Crypto-assets (MiCA) framework. According to the report, the new draft proposes a ban on “environmentally unsustainable consensus mechanisms” like the Proof-of-Work (PoW) protocol used by Bitcoin. If passed, any digital asset using such a mechanism would be banned in the European Union starting January 1st, 2025.
Stefan Berger, chairman of the Parliament’s Committee for Economic and Monetary Affairs (ECON), told BTC-ECHO that the proposal’s acceptance was “very likely.” As chairman of the ECON committee, he is largely responsible for designing the MiCA framework and for general regulations surrounding cryptocurrencies in the European Parliament.
A final Parliamentary decision on the current MiCA draft is scheduled to be made on February 28th. Following the vote, the Parliament will meet with the EU Commission and member states to evaluate the proposal. A final decision would then be expected later this year. In a previous draft of the proposal, the commission opposed a Bitcoin ban.
In an interview with the Financial Times last month, newly appointed vice chair of the Board of Supervisors of the European Securities and Markets Authority, Erik Thedeen, urged regulators across the EU to ban PoW mining. In the interview, Thedeen claimed that PoW mining was an obstacle to meeting Paris Agreement climate targets and that Proof-of-Stake was a more energy efficient consensus mechanism. “The solution is to ban proof of work. Proof of stake has a significantly lower energy profile,” Thedeen said.
Some worry that a ban on PoW-backed assets would leave Europe trailing other countries in wide-scale adoption of Bitcoin. According to the BTC-ECHO report, Robert Kopitsch from the Blockchain for Europe industry association says that the clause “would put Europe and its green miners behind and only cause them to migrate abroad and Europe to lose geopolitical grip on Bitcoin.”
Bitcoin miners have already proven their willingness and ability to migrate away from countries with strict anti-Bitcoin regulations. Following China’s crackdown on Bitcoin mining last June, the United States, Kazakhstan, and Canada became attractive locations for mining operations. According to data from the Cambridge Center for Alternative Finance, from April to July of 2021, global share of hashrate jumped from 17.7% to 35.4% in the United States, from 7.4% to 18.1% in Kazakhstan, and from 4.7% to 9.6% in Canada. Other nations in close proximity to EU member states - particularly Russia – are adopting positive postures toward Bitcoin, and could act as a magnet for miners leaving the EU.