EU’s Bill to Ban Bitcoin and Proof-of-Work (PoW) Coins Faces Setback  

The European Union authorities have rejected a proposed rule that would have outlawed the mining of proof-of-work (PoW) based cryptocurrencies such as bitcoin (BTC) and ether (ETH), amongst others in Europe. The Regulation on Markets in Crypto Assets (MiCA) bill, which is designed to promote digital assets innovation in the region, received the support of 31 MEPs while 23 voted against it, according to reports on March 14, 2022.

Bitcoin Scales Major EU Regulatory Hurdle

Bitcoin, the world’s flagship cryptocurrency, has survived a major scare in Europe, as a proposal designed to significantly limit the use of proof-of-work (PoW) based cryptocurrencies have failed to gain enough support from policymakers in the European Union. The Greens and S&D political parties proposed a last-minute amendment to the Regulation on Markets in Crypto Assets (MiCA) bill. The amendment was designed to effectively ban energy-hungry proof-of-work (PoW) based cryptos like bitcoin. Per a tweet thread by Patrick Hansen, head of strategy & growth at Unstoppable Finance, on March 14, 2022, the 32 members of the Committee on Economic and Monetary Affairs (ECON) of the European Parliament voted against the PoW ban, while 24 members supported it.

“The ECON committee of the EU just voted against the de-facto PoW ban: 32 against, 24 in favor. Big relief and political success for the bitcoin & crypto community in the EU. A majority of MEPs from EEPP, ECR, Renew & ID voted against it, while a minority of MEPs from Greens, S&D, and GUE mainly voted in favor,” he tweeted.

New Rules Adopted 

Instead of outrightly placing a blanket ban on the PoW consensus algorithm that powers bitcoin and various other crypto assets, an alternative amendment proposed by Dr. Stefan Berger was supported, effectively removing PoW mining from MiCA regulatory framework, but it will be added to the EU sustainable finance taxonomy. Hansen notes that since MiCA is focused on regulating financial instruments and financial service providers, it makes more sense to address any concerns surrounding the sustainability of PoW mining technology separately. The EU parliament’s Economic and Monetary Affairs Committee voted 31-4 in favor, with 23 abstentions on the MiCA regulatory framework which aims to boost consumer confidence and support the development of digital services and alternative payment instruments. Notably, important provisions agreed upon by MEPs for crypto market participants cover transparency, disclosure, authorization, and supervision of transactions. The framework also promises to make it easier for crypto businesses to expand their operations throughout the EU member countries by putting in place a form of license that would be valid in the entire region. Commenting on the development, Dr. Stefan Berger said:

“By adopting the MiCA report, the European Parliament has paved the way for an innovation-friendly crypto-regulation that can set standards worldwide. The regulation being crated is pioneering in terms of innovation, consumer protection, legal certainty, and the establishment of reliable supervisory structures in the field of crypto-assets. Many countries around the world will now take a close look at MiCA.”

In the coming months, the MiCA draft will be negotiated in a trilogue between the EU Commission, Parliament, and Council, after which the rules will be fully implemented and crypto firms will be given a grace period of up to six months to start operating in compliance with the new laws.