Today, in a vote of 32 against 24, the Economic and Monetary Affairs Committee of the EU Parliament voted against a proposed change introduced last week to the Markets in Crypto Assets (MiCA) framework, the European Union’s legislative framework for regulating virtual currencies. Last month, the MiCA framework released a draft of its proposed regulations for cryptocurrency. One specific provision of the document suggested a ban on digital assets that depend on ecologically unsustainable consensus procedures throughout the union’s 27 member states, with the restriction taking effect immediately beginning in January 2025. The draft was met with considerable resistance from the cryptocurrency industry, which led to an amendment in the proposed legislation over the weekend. Although the framework was amended and considerably modified from the original over the weekend, it still contained clauses that would restrict the trade and usage of proof-of-work cryptocurrencies such as Ethereum and Bitcoin throughout Europe. Why Did the EU Parliament Propose A Ban On The PoW Mechanism? Proof-of-work is the consensus process that underpins prominent cryptocurrencies such as bitcoin (BTC) and ether (ETH). In contrast to Proof-of-stake, Proof-of-Work is an energy-intensive method. According to several reports, legislators and authorities in the European Union have been pressing for a ban on mining cryptocurrencies using the mechanism since last November of last year because of the vast amount of energy used in the process. As the crypto industry’s popularity continues to increase, so does the debate about energy usage in mining and its adverse environmental effect. In effect, the MiCA framework was introduced to establish the regulation of the industry in the European Union. Moreover, the framework hoped to build a licensing structure for cryptocurrency companies among its member nations. In the framework, cryptocurrencies would be subject to eco-friendly standards in terms of the consensus mechanism used for authenticating transactions, and those that are energy-intensive will be required to build and maintain a plan to ensure compliance with the eco-friendly standards provided. This would imply that a cryptocurrency like Bitcoin, which uses a lot of energy in its mining, would have been negatively impacted if the bill had been passed.
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