European Countries Should ban Proof of Work Mining — ESMA Vice Chairman

Due to growing concerns about the energy consumption of crypto activities, the Vice-Chair of European Securities and Markets Authority (ESMA) Erik Thedéen has called for banning Proof of Work (PoW) mining. 

According to a Financial Times report, Thedéen believes that regulators in Europe should instead opt for Proof of Stake (PoS) networks instead. 

PoW Energy Consumption Raises Concerns

Both PoW and PoS are the most common consensus mechanisms for blockchains today. However, unlike PoW, which requires energy-intensive miners, PoS depends on a few validators to process transactions. 

Many blockchains now adopt PoS as a newer and more energy-efficient consensus mechanism. But the major blockchains such as Bitcoin and Ethereum still use PoW. 

For early adopters, PoW aligns better with the decentralization that blockchain promises.

However, not many people agree, especially with the global energy crunch and climate change. 

Several countries have already banned or limited crypto mining due to this reason. Recently, Kosovo banned crypto mining after blackouts due to high electricity use.

Thedéen, who also serves as the chair of sustainable finance at The International Organization of Securities Commissions and director-general of Sweden’s Financial Services Authority, has spoken against crypto mining before. 

He described Bitcoin mining as a national problem. According to him, banning PoW is the solution as “Proof of stake has a significantly lower energy profile.”

Countries now Look to Regulate Crypto Industry

ESMA calls for banning Proof of work mining echoes a wider call for regulation of the cryptocurrency industry. Almost every stakeholder from the International Monetary Fund to the Bank of England has called for more regulations. Already, some countries have started drafting regulatory frameworks for the crypto industry.

Recently, we reported that U.K. authorities might regulate decentralized finance and the crypto industry in general. Spanish financial regulators also made new rules for crypto advertising. And many countries, including South Korea, have enacted crypto-focused laws.

The current appetite for crypto regulation makes the call for a mining ban to be critical. With the global energy crunch and influential position of Eric Theéden in Europe and the international scene, the pressure on crypto miners will only increase. This represents a real threat for crypto mining companies and proof of work blockchains.