What does it mean for the industry? – Cryptonews of the World

Crypto mining based on proof-of-work (PoW) will not be prohibited in the European Union this year. Last week's widely watched committee decision in the European Parliament came to this result (EP).

What does it mean for the industry? – Cryptonews of the World

An ad hoc coalition of Social Democrats and Greens proposed a last-minute amendment that would have established a de facto ban on proof-of-work mining, the type of consensus mechanism employed by local cryptocurrencies like Bitcoin (BTC) and Ether (ETH), but it was roundly rejected. The crypto community may now relax, although some remain concerned that the industry's power-hungry consensus mechanisms will continue to be a problem.


"My first reaction to the outcome of the Monetary and Economic Affairs committee decision was a sigh of relief," said Joshua Ellul, director of the Center for Distributed Ledger Technologies and senior lecturer at the University of Malta.


"It's clear that distributed ledger and crypto technology isn't just a fad that brings together technologists, investors, enthusiasts, and idealists: it's a technology that's here to stay."


Ellul, on the other hand, believes that despite last week's success, the community should not be complacent. Not only should miners that support PoW blockchain projects "investigate renewable energy sources," but they should also do so to reduce their carbon footprint in preparation of future regulatory actions.


The committee's vote was part of the European Union's continuing Markets in Cryptocurrency Assets (MiCA) initiative, which aims to bring Europe's cryptocurrency markets closer to harmonization, cleanliness, and regulation.


"The de facto PoW prohibition amendment would have been unlikely to make it into the final MiCA deal," Patrick Hansen, chief strategist at crypto company Unstoppable Finance, told Cointelegraph. That isn't to say that energy waste and carbon footprint aren't still relevant. Hansen continued:


"The macro climate (Ukraine, inflation, etc.) is fast shifting, and energy consumption reduction could soon become a key political goal." 


Is this a cry to attention?

"This is wonderful news for the cryptocurrency sector," Yu Xiong, professor of business analysis and director of the University of Surrey's Center for Innovation and Commercialization, said of the European Parliament committee vote to Cointelegraph. It's yet another proof that cryptocurrencies and blockchain technology are gaining widespread acceptance, but it's also a "clear caution to those mining activities that use PoW." Prepare for the transformation because no one knows if another comparable vote would occur in the future." 


Later this year, Ethereum will "ideally" make the switch to a greener proof-of-stake (PoS) consensus method, he noted. Otherwise, the vote buys time for other PoW projects to make their own changes to lower their energy use and carbon footprint.


Xiong, like other assets in the crypto space, believes that intelligent regulation, such as the kind MiCA purports to provide, will benefit the crypto business as a whole. Or, as Markus Ferber, a spokesman for the European People's Party, recently put it:


"For far too long, crypto asset markets have been like the Wild West, and a European sheriff is desperately needed [...] The new cryptocurrency regulations would close the regulatory gap by establishing a clear framework to safeguard investors and maintain market integrity."


Despite this, there was substantial concern in the crypto community prior to the 32-24 vote to reject the amendment. "The MiCA issue is worse for crypto in the United States than anything else." The proposal appeared to be "a excuse to outlaw Bitcoin," according to noted Blockchain Association policy leader Jake Chervinsky. Meanwhile, CoinShares CEO Jean-Marie Mognetti called the proposed ban on PoW protocols "more than just bad news," calling it "an uninspired and foolish plan that does not reflect the realities and future of the industry."


It will soon be included in Europe's long-term 'taxonomy.'

Aside from fighting for revisions, the ECON committee also requested that the European Commission include cryptocurrency mining operations in its EU taxonomy, a classification system for sustainable activities, by January 1, 2025. After that, the EU would decide if crypto mining could be categorized as a "sustainable" activity. If the crypto market is deemed unsustainable, European institutional investors and others may be willing to grant it greater leeway. 


"The taxonomy has a significant impact on where businesses, investors, and governments are located." "You [may] invest your money and subsidies," Hansen recently noted. That effect will expand as more environmental legislation are passed. Meanwhile, he stated that "unsustainable" crypto mining is quite likely to be included in the taxonomy.


However, this is still a long way off and may be limited in scope. Hansen told Cointelegraph, "I don't think the upgrading to the sustainability taxonomy from 2025 will have a large impact on bitcoin adoption." "Depending on how you define it, it may make it more difficult to invest in mining companies in the future, but we are still years away from that, and mining is not a large economic sector in the EU anyhow."


More crucially, it will only effect mining businesses, according to Hansen, and "not the entire crypto industry as far as the alternative amendment that was voted down."


The inclusion of crypto mining in the EU taxonomy, according to Xiong, is "logical." It will put greater pressure on miners to switch to greener options, and by 2025, it is expected that fewer networks will use PoW consensus techniques. "Blockchain applications will eventually adopt solely PoS," Xiong said.


The 2025 date, according to Ellul, provides a reprieve. "I'm hoping it promotes the use of more renewable energy sources." He went on to say that one issue with the PoW energy argument is that it is highly polarized: "One side is that'regardless of the cost, PoW must continue,' while the other is that PoW will kill us all."


It was recommended that a less hot midway posture could be beneficial.


There will be a climate emergency.

Was there any takeaway from this latest regulatory squabble? One lesson, according to Xiong, is that cryptocurrency and blockchain developers should "only choose environmentally benign cryptocurrencies," because any carbon-related activity in this industry "will be immediately noticed by onlookers."


"In comparison to the aviation business, the shipping sector, air conditioners, electric fans, data centers, and dryers, the worldwide Bitcoin mining industry has a minimal environmental impact with an annually emissions rate of 41 million tons of CO2."


Ellul acknowledged that the energy problem can't be considered in isolation. "Almost everything important in today's society necessitates energy, and many other activities are also energy-intensive." One example: Ireland's power operator estimates that data centers will consume 30 percent of the country's electricity by 2028.


Overall, the European Parliament committee vote "didn't result in choking technology this time," Ellul told Cointelegraph, "but it does raise doubts about the future." Meanwhile, Hansen stated that even if the committee vote had been defeated, the mining prohibition would most likely have been removed from the draft MiCA later when the three major EU institutions (Parliament, Council, and Commission) reconcile their texts. legislative process in the EU's sole "tripartite dialogue." Even yet, a loss in the ECON committee would have been embarrassing, according to Hansen:


"Just having the EU Parliament demand for a PoW ban would have had a significant negative impact on the market." 

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