The European Union (EU) parliament is preparing to vote on March 14, 2022, concerning the draft of the proposed legislative framework governing virtual currencies called Markets of Crypto Assets (MiCA). MiCA is a framework that contains provisions that could potentially prohibit the use of proof-of-work crypto mining and push leading cryptocurrencies like Bitcoin to switch to an environmentally friendly proof-of-stake consensus mechanism.
According to a report by CoinDesk published on March 13, the provision in the late addition of MiCA will require the consensus mechanism used for validating crypto transactions to be subject to the European Union’s minimum environmental sustainability standard before it can be admitted to trading in the Union.
The MiCA legislation was first introduced in September 2020 by the European Commission (EC) and was adopted in November 2021 by the European Union. It aims to regulate the framework of digital assets to protect investors.
Due to the climatic impact of the proof-of-work consensus mechanism, the lawmakers of the EU had decided to call for a ban on PoW cryptocurrencies. A vote was scheduled earlier this year, however, it was suspended on February 26, 2022, due to the following industry backlash.
Dr. Stefan, the EU parliamentarian responsible for the MiCA legislative framework, mentioned in a tweet on March 7 that the strongly worded provision that proposes to ban crypto services that don’t follow the sustainable consensus mechanism would be scrapped. However, the decision is still not made and would be further discussed this March 14.
In the new draft of MiCA reviewed by Coindesk on November 2, 2021, a similar provision can be seen albeit significantly toned down compared to the first draft. The latest version now proposes a provision that subjects all crypto assets to a ‘minimum environmental sustainability standard with respect to their consensus mechanism used for validating the transactions, before being issued, offered or admitted to trading in the Union.’
According to Yahoo!Finance, the new provision means that small scale proof-of-work consensus mechanisms are exempted from having to meet the sustainability standard of the EU. However, what would qualify as a small scale operation is still yet to be determined.
In addition to this, the energy-intensive crypto assets that are already set in the EU even before the legislation comes into effect would have to build a phased rollout plan to ensure that the asset would still comply with the sustainability requirement.
Despite the adjustments to the provision, the crypto community is still quick to express its disagreement with the MiCA legislative framework.
Ledger, a crypto hardware wallet provider based in France issued a statement on their website on March 11, 2022, urging the citizens to contact the parliamentarians to oppose the new provision saying ‘individuals and organizations should be free to choose the technology most appropriate to their needs. Policymakers should neither impose nor discriminate in favour of a particular technology. This is deeply concerning and would have serious consequences for Europe.’
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