The European Central Bank (ECB) has blown up Proof of Work (PoW) mining as an important climate change risk. Research Bulletin It was released in July.
As expected, the report specifically mentioned Bitcoin. However, despite the move to the Proof of Stake (PoS) consensus mechanism, Ethereum also had problems.
Researchers have compiled estimated carbon footprint data on the tokens above and assessed whether they undermine the EU’s efforts to combat climate change. Next, we discussed policy options, including the 2025 deadline for “potential measures.”
Bitcoin and Ethereum have been identified as harmful to the environment
Using data from a variety of sources, including the Cambridge Bitcoin Power Consumption Index (CBECI), researchers combined Bitcoin and Ethereum mining activities with individual “medium-sized countries” such as Spain, the Netherlands, and Austria. It uses more energy than it said.
The data also showed that as of May 2022, estimated annual emissions exceeded the target greenhouse gas (GHG) emission reductions of many eurozone countries.
The report recognizes industry initiatives such as Ethereum’s transition to PoS and the Bitcoin Mining Council’s efforts to “decarbonize” and educate on sustainable combinations of energy sources used in BTC mining.
However, researchers largely rejected the last point due to the unclear methodology, lack of detail, and unreliability of the data. In addition, although such initiatives were welcomed, the report said they were voluntary, pointing out conflicts of interest between energy consumption and network security.
Is there a ban on proof of work?
The report describes some scenarios resulting from potential crackdowns on PoW mining. Given, for example, Bitcoin and, to a lesser extent, Ethereum’s institutional investor funding, researchers said the financial sector is at “transition risk.” In short, the EU’s “green transition” can affect prices and, as a result, the institutions investing in these tokens.
He also mentioned a complete PoW mining ban, citing previous impetus to implement this, such as recent initiatives promoted by the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency. Further hit, researchers said that certain crypto assets are “very unlikely” compatible with environmental, social and governance (ESG) objectives.
The report cited the recent approval of the Cryptocurrency Market (MiCA) Framework on June 30 and described discussions among lawmakers on appropriate course of action.
MiCA has not enacted a ban on PoW mining and has been praised for providing the long-awaited framework for the cryptocurrency industry. However, some strict requirements are set, especially for stablecoin issuers, as they have sufficient redemption reserves and the maximum daily trading volume is limited to € 200 million.
Comment on the framework and Seth HartrainThe Ledger’s Global Policy Officer pointed out that lawmakers peeked at the backdoor’s PoW mining ban through the requirement to reassess sustainability standards within two years.
