European Union or EU’s latest draft proposal that is seeking to regulate virtual currencies known as Markets in Crypto Assets (MiCA), is back with a provision calling for reducing the usage of proof-of-work cryptocurrencies.
The early version of the MiCA draft took a conservative approach advocating an absolute ban of crypto services that depend on environmentally unsustainable consensus mechanisms beginning in January 2025. But the provision was later removed after receiving industry backlash.
With regards to the modified draft, the EU parliamentarian, currently overseeing the MiCA legislative framework, Dr. Stefan Berger, said at the time that the paragraph in question had been scrapped, but that a final decision had not yet been made.
According to the provision, if a proof-of-work consensus mechanism is operating on a small scale, it is exempted from having to meet sustainability standards. But the question remains as to what qualifies a small-scale operation.
It also says that energy-intensive crypto assets that are already in use in the EU prior to the legislation, would be required to “set up and maintain a phased rollout plan to ensure compliance with such requirements” as specified in another part of the framework.
The latest news cooked up a storm in the crypto community.
EU’s draft raised so many questions
Paolo Ardoino who is the CTO of Bitfinex and Tether took to Twitter saying such a potential POW ban runs the risk of Centralization and this is why his firms are investing in companies that are focused on mining diversification.
One user in response to Arduino’s tweet questioned how a close circle of 30 people will decide the fate of millions of investors behind closed doors. “Are we kidding? this is a dictatorship,” he slammed. To which the exec replied, “Yup. That’s why I’m skeptical. But hysteria, lobbying, and interests can get us to unwanted results.”
Some even called on citizens in the EU to reach out to their parliamentarians to oppose the proposal. Pierre Person, a Paris-based legislator and member of the Law Commission, criticized the newly added note in a lengthy Twitter thread.
Through a series of tweets, Person warned that the prohibition of crypto-assets that rely on Proof-of-Work protocols would lead to exclusion of Bitcoin and Ether from Europe. “It would be more relevant to ban mining from fossil energies and promote players who turn to surplus renewable energy to improve the profitability of these means of production,” he added.