A recent report suggests that Proof-of-Work (PoW) consensus networks, such as Bitcoin, could potentially face a ban within the European Union (EU).
According to information shared by Daniel Batten, who is a managing partner at CH4 Capital, the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA) have been tasked with the responsibility of preparing this report. It appears that discussions or considerations surrounding the regulation of PoW consensus networks are ongoing within the EU.
The EU’s Stance on Bitcoin Energy Consumption
In a screenshot shared, the EU report delivers a concerning assessment of Bitcoin and other Proof-of-Work (PoW) blockchain protocols. It strongly recommends an outright ban on Bitcoin and its mining operations within the region, emphasizing their negative environmental impact due to their substantial energy consumption.
The report underscores that these energy-intensive mining processes pose a potential threat to the European Union’s energy security. These recent findings align with a 2023 ‘eTender’ submission titled ‘Developing a Methodology and Sustainability Standards for Mitigating Environmental Impacts of Crypto Assets.’
The eTender report further highlights that the rapid increase in crypto asset mining has led to adverse economic and social consequences. Moreover, continued reliance on such processes could impede the European Union’s sustainability objectives as outlined in the Paris Agreement.
As a response to the concerns raised in the eTender report, the EU Commission is actively working on a series of measures aimed at mitigating the environmental impact of cryptocurrency mining and establishing sustainability standards.
One of the proposed measures involves the implementation of a carbon tax on cryptocurrency mining. This tax would be based on the specific consensus mechanisms used by networks and their potential environmental effects. The ultimate goal is to exert pressure on miners to reduce their mining activities or cease them altogether.
Additionally, the EU is considering granting its member states the authority to intervene and temporarily halt cryptocurrency mining operations for the sake of energy security. Bitcoin mining is slated to receive a formal designation as ‘harmful to the environment,’ and the EU plans to devise strategies to discourage institutional investment in Bitcoin.
According to Daniel Batten, these actions are expected to position Bitcoin as a ‘haven for financial criminals,’ thereby diminishing its appeal to potential investors.
Could EU Measures Be Adopted Worldwide?
According to Daniel Batten, the ban on crypto asset mining in the European Union (EU) is expected to have ripple effects beyond the region’s borders. The European Securities and Markets Authority (ESMA) and the European Central Bank (ECB) have reportedly expressed their intent to promote the adoption of this ban in other global regions once it becomes legalized within the EU bloc.
Should this legislation be enacted, it could potentially impact publicly listed Bitcoin mining companies, including those in the United States, such as Riot Blockchain.
The controversy surrounding the electricity consumption of Bitcoin mining has been a long-standing topic in the cryptocurrency space. It is widely acknowledged that the Proof-of-Work (PoW) blockchain network, which Bitcoin operates on, consumes more electricity than many small-sized countries.
To address this concern, industry professionals and experts collaborated to form the Bitcoin Mining Council (BMC). The BMC’s primary objective is to transition the PoW protocol’s energy requirements to a more environmentally friendly alternative. So far, their efforts have yielded positive results.
Based on research by K33, it has been revealed that Bitcoin miners currently derive approximately 58% of their power from renewable energy sources. This figure is three times higher than the global average. This suggests that Bitcoin mining is progressively becoming more eco-friendly over time.
