European Markets Regulator Urges The EU To Ban Proof-of-Work Bitcoin Mining

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Proof-of-work bitcoin mining should be banned, according to the vice chair of the European Securities and Markets Authority.

Erik Thedéen suggested that European authorities explore prohibiting proof-of-work mining in favor of proof-of-stake mining.

Thedeen Argues That POW Threatens Climate Change

Based on the industry’s high energy consumption, Erik Thedéen, deputy chair of the European Securities and Markets Authority (ESMA), has urged for a ban on proof-of-work crypto mining.

Bitcoin mining has become a “national issue,” according to Thedéen, who also cautioned that cryptocurrency could jeopardize climate change goals in a recent interview with the Financial Times.

Bitcoin mining has become a “national” issue for Sweden, according to Thedéen, who is also the director general of the financial services regulator Finansinspektionen.

“Bitcoin is now a national issue for Sweden because of the amount of renewable energy devoted to mining,” Thedéen told the FT.

He added,

“It would be an irony if the wind power generated on Sweden’s long coastline would be devoted to Bitcoin mining.”

“The solution is to ban proof-of-work. Proof-of-stake has a significantly lower energy profile,” Thedéen said.

Thedéen made it clear that he was not pushing for a blanket ban on the crypto business:

“We need to have a discussion about shifting the industry to a more efficient technology. The financial industry and a lot of large institutions are now active in cryptocurrency markets, and they have [environmental, social and governance] responsibilities.”

The two mechanisms by which crypto miners reach consensus — used to authenticate transactions and create new coins — are proof of work and proof of stake. Proof of stake is the newer of the two models, and it processes transactions by relying on a smaller group of validators with stake in the game.

Proof-of-stake is a less energy-intensive mechanism that requires participants to put up cryptocurrency as collateral in exchange for the chance to approve transactions successfully.

Related article | The Bitcoin Mining Council, Saylor, And Musk: What Transpired In The Meeting?

To generate new blocks on the blockchain, proof-of-work requires participants to expend a significant amount of computational resources and energy. Although it takes more energy, it is a more secure way.

Thedéen is also the director general of Sweden’s Financial Services Authority and the chair of the International Organization of Securities Commissions’ Sustainable Finance Committee. The International Organization of Securities Commissions is a global organization of securities and futures regulators. His statements echo those expressed by the Swedish regulatory body in November of last year.

According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin now consumes 0.6 percent of the world’s electricity.

BTC/USD still hovers close to $40k. Source: TradingView.

Bitcoin Mining Battles Clampdown

The energy consumption of the Bitcoin network was one of the most contentious issues in 2021, with Elon Musk, Jack Dorsey, and Michael Saylor all participating in the debate. Tesla even dropped the Bitcoin payment option due to the Bitcoin network’s high energy consumption. And China outrightly banning mining. Unlike Thedéen, though, most of the opponents had no objections to the use of clean energy up until recently. Tesla would reconsider introducing a Bitcoin payment option if 50% of the Bitcoin network’s energy comes from renewable sources, according to Musk.

Kosovo just made crypto mining illegal, citing rolling blackouts imposed as a result of the country’s energy crisis. Bitcoin mining has also been hampered by unrest in Kazakhstan.

Related article | What Did Musk, Dorsey, And Wood Say About ESG, Green Energy, And Bitcoin Mining?

Norwegian officials said in November that they were “considering potential policy measures” to address the issues created by crypto mining and that they would support a ban on proof of work.

Featured Image from Pixabay | Charts by TradingView

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