The EU Parliament’s Committee on Economic and Monetary Affairs voted against a proposed rule that would have effectively banned bitcoin and many other cryptocurrencies throughout the European Union because of the energy they consume.
The proposed rule would have added a ban on Bitcoin’s proof-of-work mining to the new Markets in Crypto Assets (MiCA) bill that will soon create an extensive regulatory framework for crypto in the 27-member bloc.
While the rule backed by Greens and other parliamentary groups had been defeated before, it was believed this vote would be very close. In the end, the vote was 34-27. But the rule could be added as an amendment when the bill goes through the rest of the voting process.
Read also: EU Crypto Regulation Still Faces Long Legislative Road Despite Vote
Proof of work is used by Bitcoin and other blockchains that work the same way. That includes the main cryptocurrencies used for payments — Ethereum’s ether, Litecoin, bitcoin cash, and even memecoin dogecoin.
See also: PYMNTS Crypto Basics Series: What’s a Consensus Mechanism and Why Is It Destroying the Planet?
Most blockchains developed in the past few years use proof of stake, or PoS, a much less energy-intensive alternative.
That will soon include Ethereum, the No. 2 blockchain by both market capitalization and energy use, which is switching to PoS in a massive, yearslong process. However, that decision was based more on the need to improve its scalability to become an effective payments platform.
Read also: Ethereum 2.0 Will Not Be Any Faster, Vitalik Buterin Said. But It Will Still Scale Massively
Power Play
However, it is very unlikely that Bitcoin would, or even could, follow suit. For one thing, Ethereum has an influential foundation pushing its development. For another, Bitcoin has no other need as pressing as Ethereum, which was slowing to a crawl, to the point that it was losing projects and support to competing PoS platforms.
Beyond that, Bitcoin’s roughly 15,000 node operators are spread around the globe, not nearly as coordinated as Ethereum’s are, and come from a much more libertarian mindset that would rebel at what would be seen as acquiescing to a government authority.
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Instead, the committee voted to add PoW cryptocurrencies to the EU sustainable finance taxonomy that defines whether an activity can be labeled environmentally friendly by end of 2024.
Proof of work is the consensus mechanism by which new transactions are validated as honest and added to the blockchain by miners, who compete for the right to create each block and win the 6.25 bitcoin reward. Neither the XRP cryptocurrency used by Ripple nor Stellar lumens would have been affected.
The size of the block reward has created an arms race of sorts. As mining is essentially a race to solve a math puzzle, miners have invested millions in ever-faster, power-guzzling computers designed solely for mining bitcoins. The power requirements now exceed the energy used annually by the Netherlands.
Growing Debate
Bitcoin’s country-sized annual power bill has been a growing concern for year, and is starting to become a problem for investors and investment firms with ESG — environmental, social and governance — concerns.
Read more: Can Proof-of-Stake Solve Crypto’s ESG Problem?
It has had a growing impact on bitcoin’s acceptance as a currency by private corporations. Most notably Tesla, where pro-Bitcoin CEO Elon Musk quickly retreated from an announcement that it would accept the cryptocurrency, citing its environmental impact.
See more: Wikimedia Criticized for Taking Crypto Donations Over Environment Concerns
The Mozilla Foundation that develops the Firefox browser reversed a January decision to accept bitcoin after an outcry by developers and its community. And Wikipedia’s nonprofit foundation has been criticized for accepting it.
Energy consumption was big factor in China’s decision to ban first bitcoin mining and all cryptocurrencies last year.
Ironically, the decision improved Bitcoin’s environmental impact, as more than half of all mining was done in far-flung Chinese provinces with low power prices — thanks to old and extremely dirty power plants. Many relocated in parts of the U.S. and other countries with access to renewable energy like wind, solar and hydroelectric.
More ironically, that did not appease environmental opponents, who accused the cryptocurrency mining of taking green power away from other industries.
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