European Union votes against banning Bitcoin-like cryptos that use proof-of-work method
- A proposal to ban mining and transactions of energy-intensive cryptocurrencies like
Bitcoin, Ethereumfailed to win the approval of the parliamentary committee in the European Union.
- The EU Parliament is expected to regulate the trading, mining, and use of cryptos in the region.
- Proof-of-work cryptocurrencies (POW) include Bitcoin, Ethereum, and other cryptos with large market caps.
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The EU’s Economic and Monetary Affairs Committee voted in favour of the final draft of the Markets in Crypto Assets (MICA) proposal on Monday. It has sought that the European Commission should now present an alternative legislative proposal by January 2025 to "include in the EU sustainable finance taxonomy any crypto-asset mining activities that contribute substantially to climate change mitigation and adaptation.”
What will happen in the EU now?
On March 14, the EU Parliament voted on a proposal that sought to create a legislative framework for digital assets within the EU nations. The proposal sought to prohibit people in the EU from using POW currencies.
While the proposal has now failed, regulations are still expected on the trading, mining, and use of cryptocurrencies in the region. The Markets in Crypto Assets (MiCA) bill, which was voted against, had 126 articles and a detailed plan for regulating crypto assets within the EU. A new version of the bill is still expected, which may not ban POW currencies, but will focus on the regulation of cryptocurrencies in other ways within the EU.
What is POW?
Proof-of-work (POW) is a system of rewarding crypto miners, where every miner on the network is rewarded for lending their computing power for a transaction. It is used by Bitcoin and while Ethereum is moving to a different, proof-of-stake system, POW remains the primary governing method on that blockchain as well.
The POW system has been widely reported to be energy-intensive since crypto mines can consume as much power as a data centre. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining consumes 133.65 TWh of power every year, which is more than the total amount of power consumed by many small countries.
This energy consumption has been a key concern for many countries, including China, which banned
In contrast, a comparatively newer form of crypto mining — called proof-of-stake (POS) — is said to be more energy-efficient. The Ethereum Foundation has claimed that POS will cut the Ethereum blockchain’s energy consumption by 99.5% once it shifts completely to the POS system.
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