Given previous comments decrying Bitcoin’s energy use, it comes as no surprise that the European Union (EU) has proposed a regulatory package that includes provisions banning the use of proof-of-work (POW) consensus mechanisms across the union’s 27 member states.
Ban Forms Part of a Broader Crypto Regulation Discussion
POW has increasingly been under the microscope, with environmental harm being the most common concern cited. The favourite line of the corporate press is that Bitcoin consumes more energy than (insert country).
In the EU specifically, Swedish regulators began calling for a ban in November 2021, and this appears to have gained support from politicians across Germany, Spain and Norway.
The most radical proposal outlined in the package is one that prohibits “crypto services” that rely on “environmentally unsustainable consensus mechanisms”, starting January 2025. Put differently, the EU wishes to ban bitcoin mining, given Ethereum’s proposed transition to proof-of-stake.
Although environmental concerns have been frequently raised, its inclusion in the package came as a surprise to many, as one commentator noted:
Nobody expected it to become a dealbreaker and to make it into the final report.
Patrick Hansen, head of growth, Unstoppable Finance
EU parliamentarian Stefan Berger hinted that the MiCA (Regulation of Markets in Crypto-assets) package was as much a political debate as one about technology or facts:
The Greens and Socialists, as you can imagine, are criticising the proof-of-work concept and criticising the energy use, saying that bitcoin needs more energy than the Netherlands.
Stefan Berger, EU parliamentarian (Germany) Tweet this
However, Berger did note that he felt that MiCA was an inappropriate forum for debating and settling “technological or energy-related rules”.
Discussions on finalising MiCA are set to begin at the end of February, and there is hope among some that the amendments relating to POW will be dropped.
Bitcoin Mining Levels ‘Inconsequential’
For ideologues looking to score political points, no amount of data is likely to change their mind. However, for those interested in facts, a recent study shows that Bitcoin consumes less than 0.05 percent of global energy. Moreover, close to 60 percent of its energy consumption is renewable.
And this does not even cover how Bitcoin naturally gravitates towards cheap, stranded energy and how its energy use is not in competition with any other uses. Neither does it touch on the most critical aspect, namely why POW is in fact critical for a global, decentralised store of value.
Lyn Alden said it best: ” … a lot of energy concerns directed at Bitcoin start with the presupposition that it’s useless. A trillion dollars in market cap disagrees. Little concern is given to worldwide washing machine energy usage, for example, because we understand the value.”