European Parliament votes against PoW ban, bringing relief to crypto industry

A moderate version of the draft regulatory framework has won an ECON committee vote.

Earlier on Monday, members of the European Parliament’s Economic and Monetary Affairs Committee (ECON) voted against a version of the Markets in Crypto Assets (MiCA) bill that could effectively ban proof-of-work-based cryptocurrencies across the EU. This is a huge relief for the crypto industry, whose representatives have previously warned about the threat of a tough regulatory scheme.

The MiCA is a regulatory framework containing 126 articles and detailed plans for their implementation by EU and member state institutions. The draft was proposed by the European Commission in 2020 as part of its digital finance strategy.

MiCA covers a wide range of cryptocurrency-related topics such as the status of all major currencies and stablecoins, operations of mining and trading platforms, with some notable exceptions such as central bank-issued digital currencies (CBDCs), security Tokens, Non-Fungible Tokens (NFTs) and Decentralized Finance (DeFi).

The main singularity of Monday's parliamentary session was the stark differences between the two versions of the draft to be voted on. One version contained language that could ban any cryptocurrency operation that relies on PoW protocols. The controversial clause would require currency providers to submit a detailed plan of how they comply with environmental sustainability standards.

In the case of Bitcoin and some other decentralized systems, they are in principle unable to provide such details as there is no existing centralized operator or individual or collective decision-makers.

That's why this version of the draft was previously amended to remove this regulatory deadlock. As assured earlier by Stefan Berger, a member of the European Parliament's Committee on Economic and Monetary Affairs, the controversial wording should not appear in the final draft.

Eventually, a hard-line version of MiCA did emerge, but it did not have the support of a majority of MEPs. Patrick Hansen, head of strategy at crypto firm Unstoppable Finance, reported that 32 members of the ECON committee voted against the restricted version of the draft, with only 24 members voting for it. The latter minority consists mainly of members of the Green Party and the Alliance for Social and Democratic Progress.

The milder version of MiCA will now continue its journey with EU institutions without any direct or implied PoW mining ban. Instead, it requires the European Union’s chief executive body, the European Commission, to submit by January 1, 2025, a legislative proposal “aimed at bringing any crypto-asset mining activity into the EU’s sustainable finance classification scheme.”

Until January 2025, crypto mining could still be classified as an “unsustainable” activity and thus banned from receiving support and investment from European companies and governments. However, this is far from an outright ban, which could drastically change the landscape of the European crypto scene.

Next, MiCA will be considered by the European Parliament, the European Commission and the Council of the European Union.

Update: After the failed PoW ban, rapporteur Stefan Berger reports that MiCA has been approved by the European Parliament committee.