A new report from the Rousseau institute in France, which aims to prepare the future vote of the MiCA (Markets in Crypto-Assets) regulation by the European parliament in April, proposes to ban the Proof-of-Work (PoW) consensus which allows Bitcoin to exist.
Could Europe ban proof of work?
It is unlikely that Europe would ban PoW as a consensus mechanism outright, but they may implement regulations or restrictions on its energy consumption due to concerns over its environmental impact.
PoW is the mechanism used by several cryptocurrencies, including Bitcoin, to verify transactions and add new blocks to the blockchain. However, it also requires significant computational power and energy consumption, which has led to criticism over its environmental impact.
Some countries and regions have already taken steps to limit or ban the use of PoW due to environmental concerns. For example, China, which previously was one of the largest markets for Bitcoin mining, cracked down on mining operations in the country in 2021, citing concerns over energy consumption and carbon emissions.
In Europe, some countries have also expressed concerns over the environmental impact of PoW, and there have been calls for regulations to limit its energy consumption. For example, the European Union's proposed Digital Finance Strategy includes plans to reduce the carbon footprint of cryptocurrencies, including exploring alternative consensus mechanisms.
Overall, while it is unlikely that Europe would ban PoW outright, they may implement regulations or restrictions on its energy consumption due to environmental concerns.
What's the next steps?
The pro and anti crypto lobbies will continue to fight until the vote of the MiCA regulation. In the meantime, it is interesting to note that Gary Gensler, President of the US SEC, is considering most altcoins, including Ethereum, as securities, and tries to regulate proof-of-stake rather than proof-of-work.
Therefore, nobody knows what can happen in the next few weeks or months and it might be worthwhile to follow the news and to bet on a few possible scenarios, e.g., to long Bitcoin (or altcoins) if you think MiCA regulation will be relatively favorable to cryptos, or to short cryptos if you think the contrary.
Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.
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