The European Parliament's Economic and Monetary Affairs Committee voted today on The Markets in Crypto Assets (MiCA) proposal and the vote concluded with 32 voting against and 24 in favour, meaning the proposal has not passed.
One focus of the proposal was to limit the energy use of cryptocurrencies, particularly cryptocurrencies which use Proof-of-work, such as Bitcoin and Ether. If the proposal succeeded, it could have required any cryptocurrency using proof-of-work to be shifted over to a different mechanism, such as proof-of-stake or lead to "minimum environmental sustainability standards with respect to the consensus mechanism used”.
It is unclear as to how actionable it would be for the EU to shift any cryptocurrency away from proof-of-work. There is already a plan in action to move Ether away from proof-of-work towards proof-of-stake (with no exact date for the switchover yet), however there are no such plans for Bitcoin.
Many of spoken against the proposals by the EU, Micheal Saylor (CEO of MicroStrategy) said on Twitter:
"The only settled method to create digital property is via Proof-of-Work. Non-energy based crypto approaches like Proof-of-Stake must be deemed to be securities until proven otherwise. Banning digital property would be a trillion dollar mistake."
The primary concern of proof-of-work in cryptocurrencies is the environmental impact it may have but there is also a concern that crypto could be used to avoid certain sanctions which have been put in place with Russia over the invasion of Ukraine.
Research from The University of Cambridge claims if Bitcoin was a country, it would be in the top 30 energy consumers. It is unclear how much of the energy used by the Bitcoin network is renewable, some claim is that somewhere between 40% to 75% of consumed energy is from renewable sources. Conversely, research from Coinshares suggested that 74% of energy consumed by the Bitcoin network is from renewable sources. Due to the fact that Bitcoin mining occurs in many countries around the world (the largest share coming from the USA), it is difficult to say exactly how much of the energy used is renewable.
Previously Stefan Berger (A Member of European Parliament) had said on Twitter:
"With MiCA, the EU can set global standards. Therefore, all those involved are now asked to support the submitted draft & to vote for MiCA. Strong support for MiCA is a strong signal from the EU Parliament for a technology-neutral and innovation-friendly financial sector"
Only recently the US President Joe Biden, signed an Executive Order stating:
“We must reinforce United States leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets. The United States has an interest in ensuring that it remains at the forefront of responsible development and design of digital assets and the technology that underpins new forms of payments and capital flows in the international financial system.“
It is unclear if the proposals would have banned proof-of-work methods or if it merely would have lead to requirements of proof-of-work mining in the EU to be powered by renewable energy.
Many countries around the world have been making decisions on cryptocurrency recently, from China introducing a total ban to El Salvador adopting Bitcoin as legal tender alongside the US Dollar.
The draft first introduced in 2020 can be read in full here.