A proposed rule that could have, in effect, banned the popular cryptocurrency bitcoin across the European Union (EU) has been quashed.
The European Parliament’s economic and monetary affairs committee voted 30-23 on Monday to keep the provision out of a draft of the proposed Markets in Crypto Assets (MiCA) framework, the EU’s comprehensive regulatory package for governing digital assets. Six committee members abstained.
The provision, which was added to the draft last week, sought to limit the use of cryptocurrencies powered by an energy-intensive computing process known as proof-of-work across the EU’s 27 member states. The proposal met with a heavy backlash from crypto advocates worldwide.
Stefan Berger, a member of the EU Parliament and rapporteur of MiCA, tweeted the success: "First stage win at #MiCA in committee! By accepting my proposal, members have paved the way for future-oriented crypto regulation. It is now a matter of accepting the report as a whole in the final vote & sending out a strong signal for innovation."
Erster Etappensieg bei #MiCA im Ausschuss! Mit der Annahme meines Vorschlags haben die Mitglieder den Weg geebnet für eine zukunftsorientierte Krypto-Regulierung. Nun gilt es, den Bericht auch als Ganzes in Schlussabstimmung anzunehmen & starkes Signal für Innovation zu setzen.
— Stefan Berger (@DrStefanBerger) March 14, 2022
CoinDesk reported yesterday that the vote on the provision in question was too close to call and a small majority might defeat it. The proposal required all cryptocurrencies to be subject to the EU’s “minimum environmental sustainability standards with respect to their consensus mechanism.”
For popular proof-of-work cryptocurrencies like bitcoin and ether, which are already traded in the EU, the rule proposed a phase-out plan to shift their consensus mechanism from proof-of-work to other methods that use less energy, like proof-of-stake.
Although there are plans to move ethereum to a proof-of-stake consensus mechanism this year, it’s unclear whether the same can be done for bitcoin.
A slim majority of the monetary committee voted in favor of a compromise that calls on the European Commission, the EU’s executive arm responsible for proposing new legislation, to offer alternative regulation:
“5. By 1 January 2025, the Commission shall present to the European Parliament and to the Council, as appropriate, a legislative proposal to amend Regulation (EU) 2020/852, in accordance with Article 10 of that Regulation, with a view to including in the EU sustainable finance taxonomy any crypto asset mining activities that contribute substantially to climate change mitigation and adaptation.”
Proof-of-work has come under heavy criticism from some regulators and politicians around the world over energy concerns. Some EU leaders are concerned that renewable energy may be channeled into sustaining cryptocurrencies like bitcoin instead of national use.
After the parliament vote, the MiCA draft will move on to a "trilogue," a formal round of negotiations between the European Commission, Council and Parliament.
UPDATE (March 14, 15:41 UTC): Changes sourcing on story, added tweet from Stefan Berger.
UPDATE (March 14, 17:06 UTC): Adds vote details in second paragraph.