The cryptocurrency industry scored a victory in Europe on Monday as the European Parliament voted to begin work on a regulatory framework for digital assets, without specifically banning “proof-of-work” tokens like
The European initiative follows the initiative of President Joe Biden Executive Decree last week, aimed at establishing a national crypto regulatory policy. Biden wants a coordinated policy approach across the federal government, encompassing areas such as law enforcement, consumer protection, national security, financial stability and American competitiveness in digital asset technology.
A committee of the European Union Parliament on Monday voted 31 to 4 to advance legislation on crypto asset markets (MiCAs). The framework includes draft rules on the “monitoring, consumer protection and environmental sustainability” of crypto-assets, including Bitcoin, according to the European Parliament’s press office. Key provisions would cover the issuance of digital tokens, including stablecoins, or “asset-referenced” tokens whose value is pegged to a hard currency or other asset.
The EU also aims to establish rules for transparency, disclosure and monitoring of crypto transactions, a legal framework to help ensure financial stability and measures to prevent illicit activities, including money laundering and financing. terrorism, with cryptography.
“By adopting the MiCA report, the European Parliament has paved the way for innovation-friendly crypto regulation that can set standards around the world,” Stefan Berger, a German MP, said in a statement.
Most of the proposals in MiCA were no surprise, but the industry was at its wit’s end on the draft text who could have banned blockchain proof-of-work (PoW) networks and tokens like Bitcoin.
Proof of work is the consensus mechanism used to validate transactions on the Bitcoin blockchain network. These are decentralized computers competing to solve a crypto-math puzzle to validate a block of transactions on the network, a process known as mining. This is a controversial use of energy, resulting in a high carbon footprint due to the huge electricity needed to run the grid.
The draft MiCA package had included provisions that could have banned proof-of-work mining and related tokens, targeting those with “ecologically unsustainable consensus mechanisms.” Ultimately, the EU agreed to a broader goal of including crypto mining in a European framework for sustainable activities by 2025, aiming to “reduce the heavy carbon footprint” of the industry.
The cryptographic language in Europe is now vague enough that Bitcoin is likely to get a reprieve. “Any PoW ‘prohibition’ language that might have entered MiCA was vague and its practical implementation unclear,” wrote Stéphane Ouellette, head of FRNT Financial, a crypto derivatives firm, in a note to clients.
Bitcoin itself might react favorably to regulatory news. The token was trading around $39,100 on Tuesday, up 0.5% in the past 24 hours and well past its lows of around $37,700 on March 13. Other major cryptos were also higher on Tuesday, with
the second-largest token, ahead 0.3%, at $2,580.
Write to Daren Fonda at [email protected]