Bitcoin (BTC) Mining Comes under EU Scrutiny
It’s been a bearish turn of the year for Bitcoin (BTC) and the broader crypto market. Back in November, Bitcoin had struck a new ATH $68,979 before hitting reverse. An extended sell-off saw Bitcoin visit sub-$40,000 levels at the start of the year. Bitcoin had last visited sub-$40,000 back in September.
Regulatory Focus on Cryptos Intensifies
Market sentiment towards FED monetary policy has certainly contributed to the reversal. Regulatory chatter and activity have also been crypto market negative at the turn of the year, however.
Late last year, the Bank of England raised concerns over the crypto market and financial stability. The BoE also called for a global crypto regulatory framework. Earlier this year, the IMF raised similar concerns. Just this week, India’s Prime Minister Modi also called for a unified approach to cryptos at DAVOS 2022.
With cryptos back in focus, crypto mining has also drawn plenty of attention in recent weeks. Last summer, China banned Bitcoin mining as part of its goal to be carbon neutral by 2060. As a result of the ban, Bitcoin miners relocated to other crypto mining friendly nations that included the U.S and Kazakhstan.
According to Cambridge Centre for Alternative Finance, the U.S accounted for 35.4% of the global hashrate in August 2021. Before China’s ban on Bitcoin mining, the U.S had accounted for just 16.8% of global mining back in April 2021.
With the U.S having a goal of reaching net zero emissions by 2050, Bitcoin mining has come under scrutiny. Later today, a U.S Congress subcommittee hearing will look into cryptocurrencies, with mining likely to be a key area of focus.
EU Takes Aim at Crypto Miners
This week, world leaders are attending virtual DAVOS 2022. Among the top 10 global risks over the next 10-years are climate action failure, extreme weather, human environmental damage, and natural resource crisis.
Environmental activists and governments could argue that cryptos and crypto mining could contribute to all of these and possible more.
With plenty of focus on mining, the EU has also stepped forward, calling for a ban of Proof-of-Work (PoW) mining.
News hit the wires overnight of European Securities and Markets Authority (ESMA) vice-chair Erik Thedeen calling for the ban on PoW mining. The vice-chair reportedly spoke of the significant risks that PoW mining poses to the environment. He reportedly added that EU regulators should encourage the Proof-of-Stake protocol as it has “a significantly lower energy profile”.
Both Bitcoin and Ethereum (ETH) are currently PoW networks, though Ethereum 2.0 will be a shift to a PoS protocol.
With no reported plans of Bitcoin moving to a PoS protocol, the chatter on Bitcoin mining and the environment will likely intensify. Whether pressure from regulators forces a change to a PoS protocol remains to be seen. Many may argue, however, that this would be another example of influence from centralized power.