Whether you think cryptocurrencies are the future of ascendant Web 3.0 or an overhyped digital prank doomed to a dark fate, one thing is certain: cryptocurrencies are running out a lot electricity from networks around the world – 134.75 TwH, every year, to be exact. The cryptocurrency mining process is extremely energy intensive, accounting for 0.6% of global electricity consumption. This may not seem like much, but crypto consumes more electricity each year than countries like Ukraine, Norway and Argentina. From an environmental perspective, siphoning off such a large amount of energy resources without any real use or social benefit simply cannot be justified. This point becomes all the more important in the current context of the European crisis. energy crisis it hits ordinary people in the pockets. As electricity bills skyrocket and geopolitical tensions mount, crypto mining continues to drag on (and glut).
Since the start of 2022, two significant events in the European regulation of cryptocurrencies have highlighted these realities: on January 4, Kosovo has banned cryptocurrency mining and on January 19, a European regulatory leader called for a ban on cryptocurrency mining with proof of work in the block. Proof of work is the traditional, electricity-sapping form of cryptocurrency mining that underpins the two largest currencies, Bitcoin and Ether. While Bitcoin remains firmly committed to its polluting proof-of-work process, Ether has announced plans to move to a proof-of-stake process in June of this year, believing that this “will reduce the network’s carbon footprint by 99.95 percent.”
Kosovo has joined China, Algeria, Bangladesh, Egypt, Iraq, Morocco, Qatar and Tunisia completely ban all forms of cryptocurrency mining, not just environmentally unfriendly ones. The country has been in an official “state of emergency” since December 2021, when one of its two large (coal-based) power plants shut down for technical reasons, amid the European energy crisis. wide. Faced with a shortage of electricity, the government instituted a policy of continuous power cuts in order to manage the situation; from December, the country was forced to import 40 percent of its consumed energy. Prices therefore increased significantly over a relatively short period, giving Kosovo the status of hotbed of The cheapest electricity in Europe a simple memory.
It’s not that everyone pays the price: as part of persistent political tensions between Serbia and Kosovo, some municipalities with an ethnic Serbian majority under the jurisdiction of Kosovo refuse to pay for electricity – hence, these spaces have become hotspots for crypto miners. Following his statement, the Kosovo government cracked down on cryptocurrency mining operations in the region, regularly communicating convulsions mining devices.
As Kosovo becomes the first European country to ban cryptocurrency mining, the issue has once again made headlines as European Securities and Markets Authority (ESMA) Vice President Erik Thedéen shared his belief that proof-of-work cryptocurrency mining should be relegated to the past. . In his interview with Financial Timeshe spoke about the need to use hard-earned renewable energy for the transition”traditional services away from coal-fired energy sources» rather than sinking into the black hole of crypto mining. Frankly, it is unconscionable that the energy-intensive proof-of-work system can continue and undermine the urgent transition to a greener future at a time of such critical global climate change.
While Kosovo’s ban responds to the country’s efforts to combat its booming energy sector, the EU’s proposed move toward a more climate-friendly proof-of-stake cryptocurrency mining process emerges from fears that the EU is failing to meet its commitments to the Paris Agreement. if proof of work remains the standard market process. From a humanitarian and environmental point of view, proof-of-work crypto mining is an inappropriate use of precious power and European regulations in this area are overdue.
As the energy crisis continues, Thedéen’s proposal could quickly become a reality at member state level, in a manner similar to that seen recently in Kosovo. Potentially, such measures could pave the way for a more radical era of crypto regulation in the EU, which is already working to regulate the area of “crypto asset markets” (Mica) as part of its broader digital finance strategy. It should be noted that Spain recently empowered regulators to crack down on cryptocurrency advertising by influencers, furthering the cause of crypto regulation on a national level.
While the initial draft of the MiCA legislation is poised to offer increased consumer protections by improving the transparency and governance of crypto exchanges, it doesn’t address the details of mining practices – but perhaps it should. TO DO.
photo by Kanchanara
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