The report suggests that the European Union (EU) might formulate rules against PoW consensus networks including Bitcoin.
The work on this report was assigned to the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA), revealed Daniel Batten, a managing partner of CH4 Capital, in his X account (earlier Twitter).
The EU’s Stance on Bitcoin Energy Consumption
The EU report, shared in a screenshot, provides a concerning evaluation of Bitcoin and other PoW blockchain protocols. The report requires a total ban on Bitcoin and mining operations in the region, stating that these activities have negative effects on the environment because they consume significant levels of energy.
As the report notes, the safety of mining one of the energy sources that belong to the EU at risk because it is an unsafe process. These concerns are connected to a 2023 ‘eTender’ proposal called ‘Developing an approach and guidelines to address environmental consequences of Crypto Assets’.
The eTender report highlights the negative impact of the growing crypto asset mining industry on the economy and society. Moreover, its continuous utilisation may impede the region’s efforts to achieve sustainability targets aligned with the Paris Agreement.
Consequently, the main objective of eTender would be to address the effects of cryptocurrency mining by offering practical measures and implementing distinct criteria for sustainable practices.
The EU Commission has declared its intention to impose a carbon tax on cryptocurrency mining as part of its efforts to curb the environmental effects caused by crypto mining. The proposed tax would be determined by the consensus mechanisms utilized by the mining networks and the potential environmental harm they pose. Ultimately, the goal is to compel miners to reduce or even cease their mining operations altogether.
Additional measures will be implemented to ensure energy security within the EU, which will empower member countries to discontinue crypto mining whenever necessary. Moreover, a formal recognition of Bitcoin mining as detrimental to the environment will be established, prompting the EU to develop strategies discouraging institutional investment in Bitcoin.
Batten claims that Bitcoin is anticipated to be labelled as a refuge for illicit financiers, rendering it even more unattractive to potential investors.
Could EU Measures Be Adopted Worldwide?
Batten suggests that the EU ban on crypto asset mining will not be limited to its jurisdiction anymore. As per reports from the ESMA and the ECB, they plan to promote the acceptance of this ban in various other regions once it gets legalized within the EU bloc.
Approval of such a bill may mean that Bitcoin mining companies like Riot Blockchain and others that are publicly listed would have to close their operations as Bitcoin mining centres like the United States will be affected.
The energy consumption regarding Bitcoin mining is no longer an emerging issue of discourse within the cryptocurrency sphere. Widely, the PoW blockchain network is reported to consume enormous electricity amount that exceed that of a tiny nation.
The standpoint has received substantial backing from professionals and industry authorities, consequently sparking the establishment of the Bitcoin Mining Council (BMC).
The primary goal of the BMC lies in the conversion of the energy requirements of the PoW protocol into a sustainable alternative that is better for the environment. Their efforts towards this aim have yielded fruitful outcomes thus far.
A report from the K33 Research seems to indicate that Bitcoin miners use up to 58% renewable energy sources, three times higher than the global average.
Frequently Asked Questions:
What has made the EU go ahead with the idea of banning a currency as crucial as Bitcoin?
Consensus networks like Proof-of-Work consensus systems have generated concerns over the ecological effects of these systems, inciting the European Union (EU) to consider the possibility of banning cryptocurrency. A broad study that was carried out as a joint effort by the European Central Bank (ECB) and European Securities and Markets Authority (ESMA) has highlighted electric consumption arising from the use of Bitcoin mining, which can be considered to hurt nature. Therefore, to curb such environmental concerns, the EU is discussing the prohibition.
How does the EU position itself regarding the energy usage of Bitcoin?
Some experts assume that this strict ban on Bitcoin is an overreaction of the EU countries. In a letter, they demanded the complete cessation of both Bitcoin and its processes such as mining in their territories because this coin may bring some damage to nature and threaten energy security. By expressing considerable fear of the adverse economic and societal outcomes caused by mining crypto assets and its negative impact on sustainability in line with the Paris Agreement, the EU demonstrates considerable concern for those consequences.
What action does the EU have in place to deal with the environmental issues that are associated with Bitcoin mining?
The EU Commission is formulating strategies to tackle the environmental effects of crypto mining, including the adoption of a carbon tax that aligns with consensus mechanisms and environmental consequences. Moreover, EU member nations could be given the power to temporarily halt crypto mining to ensure energy security. The EU’s objective is to categorize Bitcoin mining as environmentally destructive and discourage institutional involvement in Bitcoin.
How might the EU’s proposition to ban Bitcoin impact the world as a whole?
The EU’s proposed prohibition on cryptocurrency mining might have repercussions beyond its borders, as the ESMA and ECB are eager to promote its adoption in other regions. As a result, publicly traded Bitcoin mining companies in non-EU countries like the US could potentially face effects from this ban.
Might the perception of investors towards Bitcoin be influenced by the actions taken by the European Union?
Daniel Batten warns that Bitcoin could potentially become a haven for nefarious financial actors, which might undermine its attractiveness among potential investors. To discourage mining operations and institutional investments in Bitcoin, the European Union is considering implementing measures such as imposing a carbon tax and categorising it as environmentally damaging.
What measures are being taken to mitigate the ecological consequences of Bitcoin?
A response to the environmental impact of Bitcoin’s energy consumption has come in the form of the Bitcoin Mining Council (BMC). This council aims to tackle the concerns by shifting the energy requirements of the Proof-of-Work (PoW) protocol towards eco-friendly alternatives. Remarkably, data from K33 Research reveals that Bitcoin miners currently rely on approximately 58% renewable energy sources to power their operations. This figure stands three times higher than the global average.
