The European Parliament has passed the Markets in Crypto Assets bill, however, without a passage that would stipulate a ban on Proof of Work cryptocurrencies, such as Bitcoin.
PoW ban proposal sneaked back in
The original draft of the MiCA bill sought to phase out Proof of Work cryptocurrencies, most prominently supported by EP members of The Left, The Greens, and Social Democrats in Germany and Sweden. The final voting on the bill was supposed to happen before the Committee on Economic and Monetary Affairs (ECON) on February 28.
The final draft of the bill handed in by ECON member Stefan Berger removed the explicit mention of Proof of Work and postponed the voting for two weeks. Last Friday, however, the three parties who supported the ban handed in another amendment, which sought to introduce “sustainability standards” for crypto assets. The relevant passage reads:
Crypto-assets shall be subject to minimum environmental sustainability standards with respect to their consensus mechanisms used for validating transactions, before being issued, offered or admitted to trading in the Union. Crypto-assets that are issued, offered, or admitted to trading in the Union before [entry of force of this regulation] shall set up and maintain a phased rollout plan to ensure compliance with such requirements […].
In a Twitter thread, Patrick Hanson, Head of Strategy at Unstoppable Finance, notes that this amendment would be merely a Proof of Work ban, just without explicitly mentioning Proof of Work, since Bitcoin most certainly will not produce a plan to phase out mining.
2/ 4 days ago the rapporteur @DrStefanBerger tweeted that his new compromise dropped any ban/addressing of POW.
Now just before the vote a last-minute draft brings back the ban. This is totally unexpected & I was too quick to dismiss that yesterday night.https://t.co/KDkX8inQcS
— Patrick Hansen (@paddi_hansen) March 12, 2022
Sustainability to be re-evaluated in three years
In ECON’s Monday session, the final bill by Stefan Berger was passed, but the amendment to introduce sustainability standards was rejected. Instead, Berger’s draft foresees to re-evaluate the effects of crypto mining on climate change mitigation and adaptation by the year 2025, without an explicit ban.
This leaves room for mining operators in Europe to find environmentally sustainable energy sources. Via Twitter, Berger added:
A good day for the crypto sector! The EU Parliament has paved the way for innovation-friendly crypto regulation that can set standards worldwide. The process is not over yet; there’s still steps to be taken.
While The Left in The European Parliament, the European Free Alliance (Greens) and the Progressive Alliance of Socialists and Democrats voted in favor of the de facto ban on Proof of Work, the amendment was struck down in a 30-23 vote by the European People’s Party Group (Christian Democrats), Renew Europe (liberal), the European Conservatives and Reformists, and Identity and Democracy (far-right). Joachim Schuster (S&D) laments:
These new rules will set the framework for digital finance for many years to come. It is all the more disappointing that a right-wing majority in Parliament missed the opportunity to set the first global benchmarks for the sustainability of cryptocurrencies. The principles that the report establishes in this regard are very weak and completely miss the reality.
