The MiCA regulation is being voted on today, and a possible ban on Bitcoin (BTC) mining is a crucial point of debate. Let’s take a 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 Bitcoin King (BTC). In the middle of these voices, we find notably Pierre Person, deputy of Paris who stands out in the National Assembly for his fight for a healthy regulation of our ecosystem.
If MiCA were to ban proof-of-work mining on the territory of the European Union, it would certainly be a serious strategic mistake by our politicians, and would be damaging 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 for the commission to be clearer, it wants:
“[…] identify consensus mechanisms that could pose a threat to the environment with respect 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 does highlight 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 may call into question the Paris climate agreements.
It is also 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 supposition.
Further on, it is however mentioned that what is lacking in the proof of work is a bias present in the whole industry in the broadest sense of the word, and not only in the crypto assets sector. Therefore, it is put forward that the problem must 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 centers, 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 Union takes this into account in its environmental legislation, as well as in relations and agreements with third countries globally.”
What consequences might this have?
In reality, it is difficult to speculate on what expectations will be required for proof-of-work consensus. It’s 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 wants to encourage more sustainable mining solutions on European soil, at the expense of fossil fuels like coal for example.
In the translated version of the regulation, “proof of work” appears 9 times, and if the ecological issue is pointed out, at no time is a possible ban put forward. Even if all this is still lacking in concreteness, 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, which will define the framework that awaits us.
This being said, we have only dealt with the place of mining in the text, it is not the only subject of controversy. Other aspects such as decentralized finance (DeFi) and non-fungible tokens (NFT) could indeed lead to compliance issues that could put us in the background in terms of competitiveness. But we will come back to this subject.