Bitcoin in crosshairs as EU goes after non-green crypto – POLITICO
The EU wants to shame the crypto world into greener practices – and Bitcoin is first in line.
The world’s most popular crypto is likely to fall under a scheme to grade digital currencies according to their energy efficiency, which the European Union plans to outline next week and roll out by 2025, a draft document obtained by POLITICO showed.
The scheme aims to pressure crypto companies to end power-intensive mining that can see transactions over a year use as much energy as individual countries over the same time period. Officials cheered earlier this month when Ethereum, the world’s second-most valuable crypto, switched to greener processing software as part of a so-called “merger.” Bitcoin has no plans to follow Ethereum’s lead.
The labeling is just one facet of a broader effort by the European Union to rein in cryptocurrencies at a time when the bloc is grappling with a combined energy and inflation crisis while trying to meet ambitious climate targets.
Another EU law, known as MiCA, due to come into force in 2024, will force cryptocurrencies to disclose their carbon footprint and how their operations will affect the environment.
While the White House has also warned that crypto mining could undermine US efforts to reduce greenhouse gas emissions, Europe is the first major trading bloc to regulate digital currencies – and aims to encourage other countries to follow its lead by establishing international crypto standards.
“The Commission will cooperate internationally with and build on the technical expertise of standardization bodies to develop by 2025 an energy efficiency label for blockchains, as well as minimum energy efficiency requirements,” the draft states.
In the meantime, EU capitals should develop measures to “lower the electricity consumption of crypto-asset miners” and reduce high energy prices, the 22-page document says.
Shame coin
When the price of Bitcoin hit an all-time high of $67,000 in late 2021, executives were more focused on getting out of the pandemic than reining in crypto’s carbon footprint. But the world has changed.
Russia’s invasion of Ukraine exacerbated an existing energy crisis, hit the EU and US economies and set off a scramble for new energy sources that put a spotlight on energy-intensive practices.
The huge energy demands of cryptocurrencies such as Bitcoin – which have seen some “miners” fill warehouses with specialized computers to solve complex equations and complete transactions on the blockchain – run counter to prevailing sentiment, and are increasingly in the crosshairs of regulators on both. sides of the Atlantic Ocean.
“As a regulator, we will take sustainability and ESG into account [environmental, social and governance] factors that are increasingly taken into account in all our work that we do,” the head of the European Securities and Markets Authority, Verena Ross, told POLITICO when asked how far the regulator will go to green the crypto industry.
To achieve this, ESMA will focus on promoting industry transparency, understanding the signs of greenwashing and identifying new trends and risks in the market. “All three focal points kind of talk about what might come specifically under the crypto space,” Ross added.
That said, not everyone is on board with the forced approach.
Industry lobbyists aside, officials at the commission and even among the Greens in the European Parliament are not convinced that energy grades will bring about the kind of change officials hope it will. Only around 10 percent of the world’s crypto mining operations are based in the EU, they point out.
“Creating an EU labeling system for crypto will not solve the problem as long as crypto mining can continue outside the Union, also driven by EU demand,” Spanish green lawmaker Ernest Urtasun, who led an unsuccessful fight in parliament to phase out the most energy-intensive blockchains out of Europe, wrote in an email. “Rather, the Commission should focus on developing minimum sustainability standards with a clear timeline for compliance.”
There are precedents for change as well. By switching to different processing software, Ethereum reduced its power consumption by 99.95 percent.
“Ethereum’s recent upgrade just showed that phasing out from environmentally damaging protocols is indeed possible, without causing any disruption to the network,” Urtasun added.
This article is part of POLITICO Pro
The one-stop-shop solution for political professionals that combines the depth of POLITICO journalism with the power of technology
Exclusive, breaking scoops and insights
Custom policy intelligence platform
A public network at a high level
