At the end of February, there was a ban on “energy-intensive cryptocurrencies” in the EU. At the time, quite a few feared a ban on Proof-of-Work-based (PoW) assets. The advance was averted at the last second in Parliament.
Now representatives of the EU Parliament from the Greens, Left and Social Democrats are bringing a PoW ban back on the agenda in a trialogue with the Commission and the Council. At worst, the demands could prompt crypto providers to stop supporting PoW-based cryptocurrencies like BTC.
The first requirement concerns the amount of information that crypto projects should provide in their white paper. In it, according to the will of the EU Parliament, “general information on the environmental and climate impacts of a [consensus mechanism”.
For BTC, the most well-known PoW-based cryptocurrency, this is problematic in that it is not possible to change the white paper at a later date. Experts are alarmed. Robert Kopitsch from the association Blockchain for Europe warns:
The new demands of the S&D and Greens are not only an immense effort for everyone involved, but also create new regulatory uncertainties, which in extreme cases could lead to the ban of some crypto assets such as BTC. The initiative also goes far beyond the agreement already reached in the EU Parliament.
BTC providers should check compliance with sustainability standards
Furthermore, the negotiators in the EU Parliament want to oblige crypto providers to present information about the most important negative environmental and climate impacts for each crypto asset offered “prominently” on their own platform.
In addition, the European securities regulator is to define sustainability standards and thresholds. Originally, the passed parliamentary draft referred to “guidelines”. With the new wording, the negotiators from the Green, Left and Social Democrat camps are raising the measures to a mandatory level.
The standards that are yet to be defined must therefore be complied with by crypto providers if they want to operate in the EU. The platforms should also take “effective measures” to “appropriately address negative environmental and climate impacts”. Consequently, non-compliance could result in the cryptocurrency being banned from trading venues.