EU Parliament to Ban Proof-of-Work Algorithm Over Energy Concerns

    The most current plan of the European Union’s (EU) projected legislative agenda for regulating cryptocurrencies, Markets in Crypto Assets (MiCA), still holds a stipulation restricting the use of large proof-of-work (PoW) cryptocurrencies.


    The EU argues PoW consensus algorithms, the underpinning mechanisms of both bitcoin and ether, are too energy intensive.

    Previously, the MiCA framework included a provision which would prohibit crypto services offering PoW tokens starting in January 2025. This proposition was later abandoned following large backlash by the industry.

    According to the new draft, crypto assets “shall be subject to minimum environmental sustainability standards with respect to their consensus mechanism used for validating transactions, before being issued, offered or admitted to trading in the Union.”

    If an operation is “small scale,” it’s exempt from having to meet sustainability standards. However, what qualifies as a small-scale operation is not outlined in the proposal.

    The proposal goes on to state if energy-intensive assets are already in the EU before the legislation goes into effect, the organization will have to “set up and maintain a phased rollout plan to ensure compliance with such requirements” as stated in another part of the framework.

    Ethereum has been working on moving the project away from the PoW consensus algorithm to proof-of-stake during its long waited Eth2.0 update to thwart excess energy consumption.

    The CEO of bitcoin declined our invitation to comment on the matter.

    Crypto hardware wallet company Ledger issued a statement regarding the proposition:

    “Individuals and organizations should be free to choose the technology most appropriate to their needs. Policymakers should neither impose nor discriminate in favor of a particular technology. This is deeply concerning and would have serious consequences for Europe.”

    Pierre Person, a legislator in Paris and member of the Law Commission, took to Twitter to denounce the proposed bill.

    Person addressed the impact that such regulation would have on European competitiveness in the growing crypto ecosystem.

    The EU parliament is set to vote on the latest MiCA draft on March 14.

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