Bitcoin’s (BTC) proof-of-work (PoW) mining algorithm could be facing a ban at some point in the European Union (EU). Officials from the EU were discussing last year how to best regulate the apex cryptocurrency. In fact, Netzpolitik, a German digital freedom rights organization reports that EU officials even went as far as suggesting an all-out ban on trading Bitcoin.
According to a document reflecting an EU meeting held in Nov. 2021, and one obtained by Netzpolitik through a freedom of information request, the reason for this possible ban were concerns about the network’s overall energy consumption.
Bitcoin, the world’s first and most popular cryptocurrency, currently uses a PoW consensus mechanism to secure its network and confirm transactions. However, the PoW system is extremely energy-intensive, as it requires miners to expend vast amounts of electricity to power their rigs. This not only creates a significant environmental impact, but also makes Bitcoin’s network increasingly expensive to maintain.
These issues worrying the Bitcoin community were brought up last year during a meeting with Sweden’s financial supervisor and an environmental protection agency discussing the growth of BTC mining in the country. In this meeting, officials suggested pressuring Bitcoin to switch to a Proof of Stake (PoS) mechanism.
The PoS mechanism is a type of algorithm by which a crypto blockchain network achieves distributed consensus. Under this consensus algorithm, blocks are not mined like under PoW, but rather validated by nodes that put up a stake, or deposit, in the network. The weight of each node’s validation is proportional to the size of its stake.
The main advantage of PoS over PoW is that it is much more energy efficient, as there is no mining involved. This makes PoS a more sustainable consensus algorithm in the long run. In addition, PoS is often faster than PoW, as block times are usually shorter.
During Sweden’s financial supervisor meeting, one official said that Ethereum moved to PoS “because of its community.” He noted that “if Ethereum is able to shift, we could legitimately request the same from BTC. We need to protect other crypto coins that are sustainable. We don’t see the need to protect the Bitcoin community.”
In the same meeting, another speaker suggested the EU should consider placing a blanket ban on all crypto assets that use Bitcoin’s PoW algorithm.
Concerns were raised about the consequences of a possible Bitcoin ban on investors and traders, but EU officials did not seem at all concerned with the issue, stating that “participants in BTC are fully aware of the volatility of the currency/investment risk. Do not need additional protection measures.”
Obviously, the European Union has had a rocky relationship with Bitcoin. Officials have even considered an all-out ban on the currency, but that is looking less likely now. Digital currencies present a unique challenge to regulators because of their borderless nature. However, while it would be an understatement to say Bitcoin remains a contested issue in European politics, officials there are slowly coming around to the idea that digital currencies can be regulated in a way that protects consumers without stifling innovation.
As of press time, BTC is changing hands at $40,049, down about 6% intraday.
Disclaimer: This page contains affiliate links. If you choose to make a purchase after clicking a link, we may receive a commission at no additional cost to you. Thank you for your support!