Regulatory News: EU regulatory agency calls for a ban on Proof of Work (PoW) mining activities

The Vice Chair of the European Securities and Markets Authority (ESMA) stated in an interview that the EU should ban the use of proof of work mining to prevent it from eroding the use of renewable energy generation and posing a threat to climate change.

Call from EU Regulatory Authorities

During an interview with the Financial Times, Erik Thedéen, Deputy Chair of the European Securities and Markets Authority (ESMA), called for the European Union to swiftly ban the use of proof-of-work mining activities in order to prevent erosion of the EU's renewable energy consumption or further impact the EU's climate change initiatives.

Currently, the largest cryptocurrencies in the market, Bitcoin and Ethereum, still use proof-of-work as a mechanism for transaction verification and network security. Miners consume a significant amount of electricity in the process of competing for computing power, leading to criticism of the environmental costs associated with proof-of-work. Erik Thedéen also mentioned that transitioning to proof-of-stake (PoS) mechanisms, which eliminate the need for equipment and electricity competition, could effectively reduce the energy demand.

The Environmental Challenge of Mining

China, which used to be the largest provider of computing power, issued a ban on cryptocurrency activities, including mining, at the end of last year due to concerns over money laundering, environmental issues, and energy consumption. As a result, miners have relocated their computing power out of China. According to data from the Cambridge Centre for Alternative Finance, the current dominance of Bitcoin's computing power is held by the United States at 35.4%, Kazakhstan at 18.1%, and Russia at 11.23%, with EU countries having a relatively low proportion.

Approximately 70% of Bitcoin's energy consumption is estimated to come from non-renewable sources, with its high carbon emissions and minimal actual transaction activities leading to environmental criticisms. The remaining 30% of Bitcoin mined using renewable energy sources faces another dilemma as it conflicts with many countries' renewable energy policies and goals. For instance, Swedish authorities called for a halt to "energy-intensive crypto asset mining" last November, claiming it threatens the country's ability to achieve the goals of the Paris Agreement. This aligns with recent statements from EU regulatory authorities regarding the cryptocurrency mining industry squeezing renewable energy usage.

These criticisms indirectly demonstrate the growing influence of the cryptocurrency industry. Whether the outcome involves a shift to proof-of-stake, seeking a balance between renewable energy usage and national policies, or considering the application of carbon credit mechanisms, the environmental issues associated with proof-of-work mining are indeed being increasingly acknowledged and should be properly addressed.