In a recent development, it has come to light that the European Union (EU) is considering the prohibition of Proof-of-Work (PoW) consensus networks, including the widely known Bitcoin.
The revelation surfaced through a report crafted by the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA), as shared by Daniel Batten, managing partner at CH4 Capital, on his social media platform.
EU’s Critical Analysis of Bitcoin’s Energy Consumption
The report provides a stark assessment of Bitcoin and other PoW blockchain protocols, highlighting their alleged environmental harm due to the substantial energy demands associated with their mining processes. Expressing concerns over the threat to the EU’s energy security, the report advocates for an outright ban on Bitcoin mining activities within the region.
This latest development aligns with the EU’s continuous scrutiny of cryptocurrency’s environmental impact, as evidenced by the 2023 ‘eTender’ submission titled ‘Developing a Methodology and Sustainability Standards for Mitigating Environmental Impacts of Crypto Assets.’
The eTender report emphasizes the adverse economic and social consequences generated by the surge in crypto asset mining. It also underscores the potential hindrance to the region’s sustainability goals in accordance with the Paris Agreement.
EU’s Proposed Measures to Tackle Crypto Mining Impact
To address these concerns, the EU Commission disclosed a set of anticipated measures. One significant move involves imposing a carbon tax on crypto mining activities, considering the specific consensus mechanisms and potential environmental impacts. The objective is to incentivize miners to reduce or cease their operations.
Furthermore, the EU aims to grant bloc members the authority to ‘shut off’ crypto mining to ensure energy security. In a formal declaration, Bitcoin mining will be officially labeled as ‘harmful to the environment.’ Additionally, the EU plans to devise strategies to discourage institutional investment in Bitcoin.
These proposed measures underscore the EU’s commitment to addressing the environmental implications associated with crypto mining, signaling a potential paradigm shift in the regulatory landscape for blockchain networks operating on PoW consensus.
