The European Union has rejected proposed rules that could ban cryptocurrency Bitcoin across blocks, but has set new draft rules to protect consumers and make mining more sustainable. Did.
On Monday, the European Parliament’s Economic and Monetary Commission voted on a proposal for the Crypto Assets (MiCA) framework, an EU law for managing digital assets.
Last-minute additions to the bill were made over the weekend with the aim of limiting the use of cryptography using an energy-intensive process called Proof of Work (PoW). However, it was rejected by the Parliamentary Commission on Monday.
Cryptocurrency assets are not issued or guaranteed by central banks or public institutions and are currently outside the scope of EU law. The European Parliament argues that this creates “risks for consumer protection and financial stability,” which can lead to market manipulation and financial crime.
There are also widespread concerns about the sustainability of cryptocurrencies, as some studies show that Bitcoin’s energy expenditure is equal to that of a small country as a whole.
What did the EU vote for?
MEP voted for a unified legal framework for crypto assets in the European Union. This includes consumer protection and protection against market manipulation and financial crime.
To reduce the carbon dioxide emissions of cryptocurrencies, the MEP has requested the European Commission to include crypto asset mining in the EU classification (classification system) for sustainable activities by 2025.
The draft rule cast 31 votes in favor of 4 and 23 abstentions. Formal negotiations on the draft framework will proceed between the European Commission, the Council and Parliament.
“With the adoption of the MiCA Report, the European Parliament has paved the way for innovation-friendly cryptographic regulation that can set standards around the world,” said MEP Stefan Berger of the European People’s Party.
What is PoW? How bad is it for the environment?
Bitcoin and Ethereum use PoW, the mechanism used to confirm transactions and add new blocks to the chain.
All participants in the PoW blockchain network compete at the same time to resolve the cryptographic algorithm. The algorithm is designed to be more difficult to solve as more computers are trying to solve it. In short, it has a huge amount of computing power, so energy is spent validating each block in the blockchain.
Many countries, such as China, have banned cryptocurrency mining because of their large energy consumption after fighting a power outage last year.
Despite crackdowns in China, the biggest destination for crypto miners, recent research shows that Bitcoin mining is actually much more dirty, about the same amount as a country of the same size as Greece. CO2 is emitted every year.
Some EU parliamentarians are pushing for a ban on PoW cryptography in favor of more sustainable energy. However, they also raised concerns that switching to renewable energies meant that such energies would be preferred to cryptocurrency mining over public use.
Another option is to move to the Proof of Stake model. This model is considered more environmentally friendly as it randomly assigns coins to users who provide them as collateral.
The proposed PoW limit has been repelled by the crypto community.
“Individuals and organizations are free to choose the technology that best suits their needs,” said a statement from the cryptocurrency wallet provider’s ledger.
“Policymakers must not impose or discriminate against specific technologies. This is of deep concern and will have serious consequences for Europe.”
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