European Union Lawmakers Vote No to Proof-of-Work Ban

Key Insights:

• EU lawmakers vote against banning Proof-of-Work mining.
• Bitcoin and the broader market respond favorably to the vote.
• US lawmakers could force miners to Europe.

In response to Russia’s invasion of Ukraine, several high-profile figures within the EU pressed for the urgent approval of the EU’s crypto regulatory framework, Markets in Crypto Assets (MiCA).

While ECB President Christine Lagarde was among the names pushing for the approval of MiCA, some had called for a ban on Proof-of-Work (PoW) mining before Monday’s vote.

EU Lawmakers Vote Down a Ban on PoW Mining

On Monday, EU lawmakers voted on the EU’s crypto regulatory framework, MiCA. One clause would have essentially banned PoW mining in the EU.

A ban on PoW mining would have left Europe behind as other jurisdictions look to drive innovation. It would have resulted in the banning of Bitcoin (BTC) and Ethereum (ETH).

The vote was reportedly close, with 30 members of the Economic and Monetary Affairs Committee voting against and 23 votes in favor. Six members abstained.

As a result of the vote, lawmakers removed the below language

“Crypto-assets shall be subject to minimum environment sustainability standards with respect to their consensus mechanism used for validating transactions, before being issued, offered, or admitted to trading in the Union.”

According to Bloomberg, lawmakers added,

Cryptocurrency mining to the EU’s taxonomy for sustainable finance.

Lawmakers would then decide whether cryptos fall under the classification of sustainable investment. The classifications could differentiate between PoW and other protocols, including Proof-of-Stake.

The final version of MiCA will now pass through certain channels and EU member states before a final vote in the European parliament.

With concerns over Russians evading sanctions via the crypto market ever-present, the passage could be a swift one.

PoW Miners Could Target the EU after Monday’s Vote

Monday’s vote leaves the door open for PoW mining to grow within the EU. Other jurisdictions have banned crypto mining or are exploring the impact mining has on the environment.

In Eastern Europe, some countries have targeted miners, including Kosovo and Georgia, with Russia’s central bank considering a ban earlier this year.

Of greater significance would be a US ban on Proof-of-Work mining. In January, a sub-committee hearing explored the impact of PoW mining on the environment. While there was no outcome to the hearing, lawmakers took an anti-Bitcoin stance, which may force miners elsewhere.

According to Cambridge Centre for Alternative Finance, the US accounted for 35.4% of the global hashrate in August 2021. The US accounted for 16.8% of global mining before China banned Bitcoin mining.

President Joe Biden set a new target for the US to reduce greenhouse gas pollution by 50-52% by 2030 and reach net-zero emissions by 2050. With the Chinese government reportedly seeking out underground Bitcoin miners, the EU could become the next hotbed for PoW mining.

Within the EU, Germany is the largest Bitcoin mining nation. Germany accounted for 4.48% of the global hashrate, based on August 2021 data.