EU Plans to Crack Down on Bitcoin and Other PoW Networks

The European Union (EU) is reportedly considering a series of measures to curb the environmental impact of Bitcoin and other proof-of-work (PoW) networks. According to a leaked report, the EU Commission, the European Central Bank (ECB), and the European Securities and Markets Authority (ESMA) have been working on a proposal that would label Bitcoin mining as harmful to the environment, impose a carbon tax on crypto miners, and grant EU member states the power to shut off crypto mining for energy security reasons.

Bitcoin Mining Under Fire for High Energy Consumption

The report, which was shared by Daniel Batten, a managing partner at CH4 Capital, on his X (formerly Twitter) handle, presents a grim assessment of Bitcoin and other PoW blockchain protocols. The report claims that these networks are environmentally harmful due to their high energy demands, which could threaten the EU’s energy security and sustainability goals.

The report cites a 2023 eTender submission titled ‘Developing a Methodology and Sustainability Standards for Mitigating Environmental Impacts of Crypto Assets.’ The eTender report notes that the surge in crypto asset mining generates adverse economic and social consequences, and that its persistent use could hinder the region’s alignment with the Paris Agreement. Hence, eTender would focus on providing actionable steps to mitigate the impact of cryptocurrency mining and develop specific sustainability standards.

EU Commission Proposes Carbon Tax and Other Measures

The report outlines the expected measures that the EU Commission would take to discourage or ban crypto mining in the region. These include:

• Levying a carbon tax on crypto mining, based on the network’s consensus mechanisms and possible environmental impacts. The tax would aim to coerce miners to lower their mining activities or stop them completely.
• Granting EU bloc members the authority to ‘shut off’ crypto mining for energy security at any time. This would allow the member states to prioritize the public use of renewable energy over crypto mining.
• Formally labeling Bitcoin mining as ‘harmful to the environment,’ and devising means to disincentivize institutional investment in Bitcoin. The report suggests that Bitcoin could be designated as a ‘haven for financial criminals,’ making it less appealing to prospective investors.

EU Aims to Extend the Ban to Other Regions

According to Batten, the EU’s crypto asset mining ban is not expected to be confined to the region alone. The ESMA and the ECB have reportedly revealed that once the ban is legalized in the EU bloc, they will push for it to be accepted in other regions. If the bill is enacted, this move could see Bitcoin mining capitals like the US close down publicly listed Bitcoin mining firms like Riot Blockchain.

The report has sparked a heated debate among the crypto community, with some arguing that the EU is trying to stifle innovation and competition, while others pointing out the flaws and inaccuracies in the report’s assumptions and data. Some have also questioned the authenticity and legitimacy of the report, as it has not been officially confirmed or published by the EU authorities.