Cryptocurrency mining via the Proof of Work (PoW) mechanism – used by BTC (BTC) – should be banned in the European Union (EU), according to the vice president of the European Securities and Exchange Authority. Markets (ESMA).
In a recent interview with the Financial Times, Erik Thedéen, who also serves as director general of Sweden’s financial services regulator, said that the bloc’s regulators should spur the cryptocurrency industry towards less energy-intensive mining.
“The solution is to ban proof of work,” he said. “Proof-of-stake [PoS] has a significantly lower energy profile.”
According to Thedéen, the cryptocurrency sector’s energy use is becoming a “national issue”:
“BTC is now a national issue for Sweden because of the amount of renewable energy dedicated to mining. It would be ironic if the wind energy generated along Sweden’s long coastline were dedicated to BTC mining,” he added.
PoW or PoS?
The proof-of-work model, used by BTC and ETH, involves miners using dozens of powerful computers to solve complex mathematical problems in order to record transactions on the blockchain and be rewarded with new cryptocurrencies.
Meanwhile, proof-of-stake mining uses less energy. After all, users earn the right to record transactions based on how much investment – or “staking” – they have on the network.
ETH, the second largest cryptocurrency by market cap, has plans to move to this model later this year.
BTC energy consumption
In the FT interview, the Swedish regulator emphasized that it is not calling for a blanket ban on cryptocurrencies. However, he said he was trying to promote a “discussion about the industry’s shift to more efficient technology.”
According to data from the Cambridge BTC Electricity Consumption Index, BTC now consumes 0.6% of the world’s electricity.
It is worth noting that the EU does not represent a significant portion of the proof-of-work mining industry.
BTC mining is currently dominated by the US (35.4%), Kazakhstan (18.1%) and Russia (11.23%), according to the Cambridge Center for Alternative Finance.
However, with mining banned in China, previously dominant in the sector, the EU may be concerned about the eventual growth in its share.