Cryptocurrency: EU Proposal Seen As De-facto Ban on Bitcoin Fails in Vote. All You Need to Know
The European Union (EU) has vetoed a planned law that would have effectively banned the popular cryptocurrency bitcoin across the EU.
It opted to drop a planned rule in the framework that would have made it illegal for persons in the EU to generate cryptocurrencies like Bitcoin using an energy-intensive procedure.
However, the European Parliament’s economic and monetary affairs committee on March 14 voted 30-23 to remove the provision from a draft of the EU’s proposed Markets in Crypto Assets (MiCA) framework, which governs digital assets. Six members of the committee voted no.
The divisive plan aimed to reduce pollution caused by the most inefficient cryptocurrency. Even if the idea failed, officials are sure to scrutinise cryptocurrencies as the EU attempts to address the twin issues of climate and energy. As China banned cryptocurrencies last year, getting rid of their pollution has become a global game of whack-a-mole.
THE CONCERNS
Cryptocurrencies like Bitcoin and Ether have raised concerns about the amount of electricity they use, as well as the quantity of planet-warming greenhouse gas emissions they produce as a result.
The EU is already dealing with an energy crisis that has driven up electricity prices over 2021 and the situation is only getting more complicated as the EU tries to wean itself off Russian gas supplies.
The Bitcoin network consumes a massive amount of electricity and the majority of the electricity is needed in a purposefully energy-inefficient procedure dubbed “proof of work” for confirming transactions.
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Bitcoin miners utilise dedicated computers to solve complicated puzzles to earn fresh tokens and verify transactions. These progressively difficult riddles effectively embed energy inefficiency into the blockchain.
The EU parliament debated prohibiting puzzle-solving because it consumes so much energy. According to reports, the framework had previously included language that would have phased out ‘proof of work’ in favour of less energy-intensive verification approaches.
The regulation targeting ‘proof of work’ has been removed from the framework on March 14. Now it requested that the European Commission comment separately on the environmental impact of cryptocurrency mining as part of its attempt to define what constitutes a “sustainable” investment.
IN EUROPE
According to reports, Europe became the world’s biggest cryptocurrency economy after China’s bitcoin ban.
An early analysis suggested that central, northern and western Europe accounted for 25% of all cryptocurrency activity globally.
In the mid-2020s, crypto transaction volumes in Europe began to rise, while volumes in East Asia – the previous world cryptocurrency capital by transactions – began to plummet.
However, several EU legislators have pushed for a ban on ‘proof of work’ cryptos in favour of more environmentally friendly energy sources. They have, however, expressed worries that moving to renewable energy would imply that such energy will be prioritised for crypto mining rather than public consumption.
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Another alternative is to switch to the Proof-of-Stake model, which is regarded greener because it distributes coins to users at random after they put up coins as collateral.
But the bitcoin community has reacted negatively to the proposed plan to limit ‘proof of work’.
Separately, in India, people are taking interest in cryptocurrency-related matters, especially after the Budget session in February this year.
While presenting the nation’s budget for the coming year, Finance Minister Nirmala Sitharaman had made two big crypto-related announcements. First, the government intends to levy a 30% tax on any income generated by crypto transactions, as well as a 1% at-source tax on all transactions (TDS). Secondly, India intends to launch a digital rupee (a central bank digital currency or CBDC) within the fiscal year, the first time frame mentioned.
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