September 27, 2022

A win in the European Parliament, but will mining rules have to change? “Eventually, only PoS will be adopted by blockchain applications.”

Voting results

Proof-of-work (PoW) crypto mining will not be banned in the European Union — not this year at least. That’s the conclusion from last week’s closely watched committee vote in the European Parliament (EP).

A last-minute amendment presented by an ad hoc coalition of social democrats and Greens would have established a de facto ban on proof-of-work mining — the type of consensus mechanisms used by native cryptocurrencies like Bitcoin (BTC) and Ether (ETH) — has been decisively rejected. The crypto community can breathe easily, but some still worry that the industry’s problem with its energy-intensive consensus protocols remains.

EU bác đề xuất cấm tiền điện tử mã hóa - ảnh 1
Source: Bloomberg

“My first reaction to the Economic and Monetary Affairs committee vote outcome was a sigh of relief,” Joshua Ellul, director at the Centre for Distributed Ledger Technologies and senior lecturer at the University of Malta, told Cointelegraph, adding: “It is definitely a sign that crypto and distributed ledger technology is no longer a niche bringing together technologists, investors, hobbyists and idealists — it is a technology that is here to stay.”

However, Ellul also advises people not to be subjective with the victory in the European Parliament, miners of projects operating under the PoW mechanism should conduct research on renewable energy sources. This in the future will help them avoid legal sanctions as well as minimize carbon emissions from mining.

The Commission’s vote is part of the European Union’s ongoing Markets in Cryptocurrency Assets (MiCA) process, which is designed to bring harmony, clarity and rule to the cryptocurrency markets in the EU. The MiCA is a regulatory framework that includes 126 provisions as well as a detailed implementation plan for EU institutions and member states.

A wake-up call

“This is good news for the crypto sector,” Yu Xiong, professor of business analytics and director of the Center for Innovation and Commercialization at the University of Surrey, told Cointelegraph, regarding the EP committee vote. It is another sign that cryptocurrencies and blockchain technology are being widely accepted by the public, but also “definitely provided a warning to those mining activities that use PoW. Prepare for transformation because nobody can predict if there will be another such vote in future.”

Ethereum will “hopefully” successfully transition to a more eco-friendly proof-of-stake (PoS) consensus mechanism later this year, he added. Otherwise, the vote provides time for other projects that use PoW to undertake their own transformation to reduce energy consumption and their carbon footprint.

In addition, the EU Economic and Monetary Commission has adopted a separate proposal to add cryptocurrency mining to the EU’s sustainable finance classification. This will determine whether cryptocurrency can be considered a sustainable investment.

The MiCA is currently being approved by the EU executive as well as EU member states and the entire European Parliament before it can become a complete legal basis.