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Tuesday, May 24, 2022

🎓 What is the legal status of bitcoin mining in the EU?

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The legal status of bitcoin mining in the European Union depends on the results of today’s vote in the European Parliamentary Committee on Cryptocurrency Markets (MiCA).

A controversial line regarding the “minimum environmental sustainability” of cryptocurrency mining has been reintroduced in the bill after previously being excluded.

The new line will require blockchain operators to submit an implementation plan detailing how they commit to environmental sustainability, and failure to submit the plan could prevent cryptocurrencies from being mined or traded in the EU.

Although not specifically specified, the bill will directly affect Proof-of-Work (PoW) chains, PoW is the consensus algorithm used by the network of Bitcoin, Ethereum and many other cryptocurrencies.

Since Bitcoin (BTC) is decentralized, an implementation plan cannot be issued on its behalf, and the absence of such a plan could threaten the existence of Bitcoin mining operations throughout the European Union.

The European Union accounts for around 12-14% of the global hash power in the Bitcoin network, with Germany and Ireland contributing the largest share, according to data from last year from the University of Cambridge and Statista.

Concerns about the energy consumption and carbon emissions of bitcoin mining are now at the forefront of the debate about how the European Union should regulate it.

According to a report issued by the Frankfurt School last November, as of August 2021, the Bitcoin network annually required 90.86 terawatt-hours (TWh) of energy, which represents around 0.05% of total world consumption, and the network is only responsible for about 0.08% of total global carbon emissions, although these metrics are difficult to calculate precisely.

French MP Pierre Pearson warned that a mining ban would draw talent and innovation out of the region, saying in a tweet on Saturday that “by banning Bitcoin and Ether, and complicating the use of NFT and DeFi, the European Parliament is mortgaging our and financial sovereignty”.

If the bill passes as-is, Ethereum won’t be involved for long, with the network expected to complete the “merger” of Ethereum 2.0 sometime this year into a proof-of-stake (PoS) network that will not require physical mining rigs to reach network consensus There could be more serious repercussions for bitcoin miners.

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