With a vote likely on Monday, the EU appears to be on the verge of passing its crypto regulatory framework. However, some worry that, as written, the plan will effectively ban Bitcoin and Ethereum in the EU.
Proof-of-Work (Pow) Crypto Will Be Restricted by MiCA
The European Central Bank's (ECB) President, Christine Lagarde, appears to be getting her way, as she recently asked for the region's cryptocurrency regulation to be ratified as quickly as feasible.
Crypto enthusiasts, on the other hand, are likely to be disappointed by the verdict, given the EU's Markets in Crypto Assets (MiCA) regulatory framework still has a provision prohibiting the use of PoW crypto.
In an earlier draft of MiCA, digital assets would have been prohibited from using ecologically unsustainable consensus methods.
Following industry concerns, the clause carrying this requirement was later eliminated. However, the current draft, which is expected to be adopted on Monday and is supported by the majority of EU MPs, contains a similar clause, albeit in milder language.
Bitcoin, Ethereum, and even the popular meme coin Dogecoin all use the PoW consensus algorithm.
In order to validate transactions on the network, the process demands multiple computers to work hard to solve complicated problems, with the quickest system receiving crypto rewards.
It has been hailed as a successful technique for securing the blockchain and discouraging malicious actors from verifying bogus transactions. It's worth noting that Ethereum and DOGE are on the verge of switching to PoS.
However, despite its many advantages, the system has a significant drawback: it consumes a lot of energy to power these computers or mining equipment.
With the world attempting to reduce emissions, it has become a key worry for legislators worldwide, including in the EU. In November of last year, Swedish officials advocated a ban on crypto mining in the EU in an open letter that garnered traction in Norway, Spain, and Germany.
The inclusion of this clause in the EU's MiCA has elicited a range of views. Pierre Person, a French legislator and member of the Law Commission, raised his concerns about the draft's impact in a nine-tweet thread.