Limiting Proof-of-Work Crypto Back On the Table As EU Prepares Crypto Vote
A provision aiming to strong arm ‘proof-of-work’ cryptocurrencies like Bitcoin to switch to ‘proof-of-stake’ consensus mechanism is in a draft of MiCA, scheduled to be voted on Monday.
European Union’s (EU) proposed legislative framework for governing virtual currencies, Markets in Crypto Assets (MiCA), still has a provision that could limit the use of proof-of-work cryptocurrencies.
Proof-of-work is a consensus mechanism that underlies popular cryptocurrencies like Bitcoin and Ethereum. The computing process has come under heavy fire from EU lawmakers over energy concerns.
An earlier draft of the MiCA framework had a strongly worded provision that proposed a ban of crypto services that rely on environmentally unsustainable consensus mechanisms starting in January 2025. The provision was later scrapped following negative feedback from the industry.
Dr. Stefan Berger, who leads the MiCA legislative framework, said at the time that the paragraph in question had been removed, but that a final decision had not yet been made.
A version of the new draft, has a similar provision though it has been significantly toned down from the original. It reads that 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.”
The provision states that if a proof-of-work consensus mechanism is operating on a small scale, it is exempt from having to meet sustainability standards. However, it’s unclear what qualifies as a small-scale operation.
It also says that energy-intensive crypto assets that are already in use in the EU before the legislation comes into effect, will have to “set up and maintain a phased rollout plan to ensure compliance with such requirements” as specified in another part of the framework.
Another version of the new draft, would soften the language even more, but, it seems that the stronger wording has a lot of support among parliamentarians.
Ethereum has announced plans to move from proof-of-work to proof-of-stake. It is unclear how Bitcoin, the largest cryptocurrency, could transition from proof-of-work, if at all.
Recently there’s been a huge push to use renewable energy in Bitcoin mining, the industry is still very much dependent on traditional energy sources, which makes Bitcoin potentially vulnerable under the stronger proposal.
Crypto Community Reacts
The crypto community has been actively voicing opinions on the matter – some calling on EU citizens to contact their parliamentarians to oppose the measure.
Ledger, a crypto hardware wallet provider, issued a statement saying:
“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, condemned the newly added language on series of tweets. In it, he addressed the impact that such regulation would have on European competitiveness in the growing crypto ecosystem.
Michael Saylor, the CEO of MicroStrategy and a Bitcoin advocate, also voiced his disagreement, saying:
“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.”
