May 24, 2022

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EU crypto bill, MiCA, heads to vote Monday without Proof of Work ban

EU crypto bill, MiCA, heads to vote Monday without Proof of Work ban
  • Language aimed at banning Proof of Work coins across the continent is noticeably absent
  • The bill still states that crypto assets “must be subject to minimum environmental sustainability standards,” tweets the head of growth at Unstoppable Finance

A final version of a major EU bill is expected to be voted on, which has sparked controversy over its targeting of the Proof of Work (PoW) consensus mechanism in the crypto industry.

Markets in Crypto Assets (MiCA) law Projectintroduced in 2020, seeks to tighten regulation around digital assets by creating a licensing system on the continent and simplifying a uniform set of rules for member states.

These rules include transparency and disclosure requirements for issuing digital assets, authorization and supervision of crypto asset service providers, consumer protection rules and measures to prevent market abuse.

The bill, under Section 61(9c), also previously sought to create a framework that would ban crypto services from using Proof-of-Work cryptocurrencies such as bitcoin and ether. This section of the legislation, which has since been updated, was expected to enter into force sometime in 2025.

Lawmakers and environmental activists have been pushing for regulation of cryptocurrency mining since at least November last year, citing what they saw as energy-intensive crypto activity stemming from proof-of-work.

After a massive public outcry and condemnation of the bill for potentially hampering financial innovation across the region, the rule was postponed indefinitely on February 28.

“In light of the important debate around sustainability, my suggestion is to include crypto assets, like all other financial products, in the rating area,” on Twitter. Stephen BurgerMEP for Germany, on Tuesday.

“An independent proof of work discussion at MiCA is no longer planned.”

Berger was tasked with overseeing the bill and introducing the final legislation last week.

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To pass legislation within the European Union, Parliament, which represents European citizens, and the Council, which represents the governments of the European Union’s 27 member states, must reach agreement on the matching text from a specific invoice. This process is often time consuming and fraught with setbacks, since each member has an approximately equal say in matters affecting the region as a whole.

Some observers remain cautious, as the document continues to state that crypto assets “must be subject to minimum standards of environmental sustainability,” Patrick Hansen, head of growth at Unstoppable Finance, noted in a tweet Sunday.

Hansen argues that while the wording regarding the business plan has changed, “the effect is essentially the same.”

Hansen tweeted, citing parts of the draft document, that existing cryptocurrencies “must establish and maintain a phased deployment plan to ensure compliance with these requirements.”

“Since there is no way that Bitcoin can implement and implement a deployment plan outside of the Proof of Work, it will affect Bitcoin as well.”

The Bitcoin network is highly decentralized, governed by a social consensus made up of a group around it 15,000 full node operators and miners. It is highly unlikely to change the Proof of Work consensus mechanism, although it is theoretically possible; PoW, like Described in the Bitcoin White Paper, in the Bitcoin community as a primary feature responsible for the security of transactions on the network. An alternative without him – like many Controversial hard forks From the past – simply not considered “Bitcoin”.

The more crypto-friendly language in the current version of MiCA that will likely be skipped from the committee vote is a marked improvement over the original text, Hansen says. previously described as a “suicide suggestion”.

“It would kill the entire European crypto industry, which is the only sector that fully complies with European values ​​and in which the EU can actually be competitive.”

In defense of proof-of-work mining From the perspective of environmental sustainabilityJean-Marie Magnetti, CEO of CoinShares Refers to internal search which concludes that “the potential for miners to reduce the carbon footprint of flared and vented natural gas…is sufficient to completely offset all emissions or even have a positive effect on net emissions.”

Mognetti says implementing a mining ban in Europe would be detrimental to the union’s environmental goals.

Berger noted that the MiCA is now heading to a vote within the Economic and Monetary Affairs Committee (ECON) before it can be considered in a tripartite meeting – a reference to tripartite meetings between representatives of the European Parliament, the European Council, the European Commission and representatives of the EU executive.

“With MiCA, the EU can set global standards,” Berger said. “The strong support for MiCA is a strong signal from the European Parliament for a technology-neutral and innovation-friendly financial sector.”


Update, March 14, 2022 at 11:14AM ET:

The ECON committee to push MiCA voted without clear language on Proof-of-Work mining for crypto-assets, paving the way for the negotiation of the draft at the tripartite meeting, according to Patrick Hansen And the Blockchain for EuropeIt is an industrial interest group based in Brussels.

McCauley Peterson contributed reporting for this story.


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  • Sebastian Sinclair

    blockworks

    Senior Correspondent, Asia News Bureau

    Sebastian Sinclair is a senior news reporter at Blockworks operating in Southeast Asia. He has experience covering the cryptocurrency market as well as some of the developments affecting the industry including regulation, business, mergers and acquisitions. He does not currently own any cryptocurrency. Contact Sebastian via email at [email protected]