Thursday, June 8, 2023

PoW Ban Removed on MiCA


The requirements regarding cryptocurrencies that use proof of work designs for their blockchains will no longer adapt to the MiCA framework in the future.

The European Union has approved the draft framework for the Markets in Crypto Assets (MiCA) regulation.

In the trilogues between parliament, council, and commission, the measure will discuss and negotiate further. EU leaders are working together to obtain a final agreement on regional regulatory requirements.

Overall Ecological Impact

Concerns about the carbon footprint and general ecological impact of mining for networks using proof-of-work consensus methods have raised in the past. Coins like Bitcoin and Ethereum have sparked a groundswell of support for laws prohibiting such networks and mining operations.

This means that, for the time being, blockchains based on a PoW consensus algorithm, such as Bitcoin, will mine and sell in the eurozone without any restrictions. Of course, given the EU’s current geopolitical predicament in the midst of the Russia-Ukraine conflict, this could change over time.

The European Parliament’s ECON (Economic and Monetary Affairs) committee rejected modifications to the Markets in Digital Assets (MiCA) draft. Due to environmental concerns, it included regulatory mechanisms for addressing PoW networks. All crypto mining facilities for blockchains that require proof-of-work consensus algorithms will basically forbid if the plan passes.

If the bill passes the committee, it will send to the European Parliament for a bigger vote. The European Commission and the European Council will then meet in trilogues to discuss it. Notably, the latter has already enacted its own crypto regulatory framework in response to calls for tighter crypto controls. This is in light of the global political economy’s terrible state in the aftermath of the ongoing Russia-Ukraine crisis.

Focusing on Other Aspects

However, it appears that support for such a prohibition has faded as a result of the current vote. Regulation will instead focus on other parts of MiCA. It remains to see what this means for Bitcoin and Ethereum in the European Union. However, it appears that, for the time being, they are totally lawful under the new regulation, while mining will continue to be unaffected.

Since its inception, German soloist Stefan Berger has led the MiCA regulation ideas. He has instead proposed that the MiCA framework merge with the EU Taxonomy for Sustainable Finance, according to him.

The MiCA trilogues expect to begin this week, with topics including non-fungible tokens (NFTs) and decentralized finance (DeFi) on the agenda. This is in addition to other concerns about the crypto space’s growth as a mainstream enterprise.

According to statistics, Europe controls around 14% of the world’s total Bitcoin (BTC) mining hash power. The countries with the most mining facilities on the continent are Ireland and Germany. It will be interesting to see how these arguments play out in the following weeks as the sector and regulations surrounding it continue to evolve.

Jacob Yang
Jacob Yang
Jacob Yang works at Cryptoconstellation as a writer. He has been working in finance for the past 6 years. Jacob loves sharing news about the cryptocurrency world and he, himself has invested in a few. Jacob enjoys travelling and finding the best restaurants wherever he goes.

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