The MiCA regulation is being voted on today, and a possible ban on Bitcoin (BTC) mining is a key point of debate. Let’s look at what the text says about proof of work and whether the ecosystem’s concerns about it are well-founded.
The place of mining in MiCA
As the vote on MiCA takes place today in the European Parliament, many voices have been raised in recent days against a potential ban on proof-of-work mining in member states, a consensus used by the Bitcoin King (BTC). Amongst these voices, we find Pierre Person, MP for Paris, who stands out in the National Assembly for his fight in favour of a healthy regulation of our ecosystem:
(1/9) MiCa regulation will be voted on next Monday. As it stands, it definitively condemns the future of crypto-assets in Europe. By banning Bitcoin and Ether, by complicating the use of NFT and DeFi, the European Parliament is mortgaging our monetary and financial sovereignty.
– Pierre PERSON (@Pierr_Person) March 11, 2022
If MiCA were to ban proof-of-work mining in the European Union, it would certainly be a serious strategic mistake by our politicians, and would be detrimental to our competitiveness in the long run. However, if the interpretation of the policies is still to be defined, the text does not mention a ban, even if it is true that one point is confusing. Indeed, the text calls on the Commission to be clearer, it wishes to:
[…
” […] identify consensus mechanisms that could pose a threat to the environment with regard to energy consumption, carbon emissions, depletion of real resources, waste and specific incentive structures. Unsustainable consensus mechanisms should only be applied on a small scale. “
The text effectively highlights the environmental problems of this consensus. It highlights the use of fossil fuels for some of the mining and the replacement of the hardware used which leads to e-waste, all of which could undermine the Paris climate agreements.
Moreover, it is possible that future regulations will only concern large structures without worrying individuals mining at home. The latter could be considered as operating on a “small scale”, but this is only a guess.
Later on, however, it is argued that what is missing from the proof of work is a bias present in the entire industry in the broadest sense of the word, not just in the crypto-asset sector. It is therefore argued that the problem needs to be addressed globally, in order to transform our society in its energy consumption.
“However, given that other industries (such as the video game and entertainment industry, data centres, other tools deployed in the financial and banking sector and beyond) also consume energy resources that are not climate friendly, it is important that the EU takes this into account in its environmental legislation, as well as in relations and agreements with third countries on a global scale. “
What consequences might this have?
In practice, it is difficult to speculate on the expectations that will be required for consensus on the proof of work. It is still unclear and we understand the heated debates due to different interpretations.
If the real impact of Bitcoin on the environment is to be put into perspective, that is not the issue here. In this version of the text, the MiCA regulation aims to encourage more sustainable mining solutions on European soil, at the expense of fossil fuels such as coal.
In the translated version of the regulation, “proof of work” appears 9 times, and although the ecological issue is pointed out, at no point is a possible ban put forward. Even if all this is not yet concrete, it is therefore necessary to put this point into perspective.
Nevertheless, it is really the interpretation of the forthcoming regulatory text and the jurisprudence that will result from it that will define the framework that awaits us.
This being the case, we have only dealt with the place of mining in the text, which is not the only subject of controversy. Other aspects such as decentralised finance (DeFi) and non-fungible tokens (NFT) could indeed lead to compliance issues that could push us into the background in terms of competitiveness. But we will have to come back to this subject
