The ECB considers a mining ban for proof-of-work (PoW)-based cryptocurrencies to be “probable”. This is from a new one report from the central bank. In it, the authors primarily focus on the power consumption of BTC. According to the report, this is currently between the annual consumption of Spain and the Netherlands.
Due to rising energy prices as a result of the war between Russia and Ukraine, lawmakers should “take a closer look” at the productive use of their power sources, writes the ECB. Furthermore, because of the desired climate neutrality, decisions would have to be made to prevent the use of renewable energy sources from being adversely affected by crypto mining.
To address the “significant carbon footprint” of PoW-based cryptocurrencies, the central bank believes a number of government policies are “likely.” Specifically, the ECB is bringing a CO₂ tax on holding or transferring BTC into play.
In addition, a complete ban on mining is also conceivable. The authors refer to China, where mining cryptocurrencies has been banned for over a year. This could slow down the adoption of PoW-based cryptocurrencies while promoting more environmentally friendly alternatives such as Proof-of-Stake (PoS).
There is “no mining industry worth mentioning” in the EU or the euro area, says Philipp Sandner, professor at the Frankfurt School of Finance & Management. For the economist, savings in other areas are more effective.
Furthermore, the general electricity mix in Germany is no better and no worse than the BTC electricity mix. Every single kilowatt hour that we consume in Germany – television, computer games, lighting – is roughly 50 percent green and 50 percent fossil. Shouldn’t we be much more active there?
ECB compares BTC to internal combustion engines
To support its argument, the ECB refers to the EU’s recent ban on internal combustion vehicles from 2035. BTC and other PoW-based cryptocurrencies are to be equated with them, while PoS corresponds to electric cars in the analogy.
Government agencies have a choice to encourage the crypto version of the electric vehicle, or restrict or ban the crypto version of the fossil fuel car.
The considerations of banning PoW-based cryptocurrencies are not new. As part of the MiCA regulation, there was a ban on BTC in the EU. However, the ban did not make it into final legislation.