ECB’s Bulletin Hints At Possible Ban On PoW Crypto By 2025
In a research bulletin released in July, the ECB (European Central Bank) slammed the PoW (Proof-of-Work) consensus. The ECB said PoW poses a considerable risk to climate change.
Specifically, the report mentioned Bitcoin as one of the major digital currencies using the PoW. It also mentioned Ethereum though it would soon switch to the PoS (Proof-of-Stake) consensus process.
Furthermore, the researchers gathered estimates of the carbon footprints of BTC and ETH. Afterward, they assessed if they threatened the EU’s commitment to combating climate change.
After that, the researchers explored alternative policies and a 2025 deadline for “possible steps.” Hence, by 2025, the ECB might be forced to take a stance on PoW consensus.
ECB Says BTC And ETH Damages The Environment
Furthermore, researchers found that the combined energy use of ETH and BTC is high. The body said it is greater than individual “mid-sized countries,” such as the Netherlands, Spain, and Austria.
Their findings were based on data from various sources, including the CBECI (Cambridge Bitcoin Electricity Consumption Index).
Additionally, the statistics talked about the GHG emissions of nations in the Eurozone. As of May, most of their yearly GHG emissions exceeded their expected reductions.
The study also recognized initiatives to reduce energy consumption. This includes Ethereum’s move to PoS and the BMC’s work to “decarbonize.”
It also highlighted the BMC’s decision to spread awareness on using sustainable energy for BTC mining. However, experts primarily ignored the last statement of sustainable energy use.
This is due to ambiguous methodology, a lack of specifics, and unreliable data. According to the report, there is a conflict of interest between network security and energy consumption.
A Possible Ban On Proof-of-Work?
The report discussed several outcomes from a prospective crackdown on PoW mining. The researchers claimed that the financial system is vulnerable to “transition risk.”
This is due to institutional investment in Bitcoin and, to a lesser extent, Ethereum. This means the EU’s green revolution would affect BTC and ETH’s prices. Subsequently, it would affect institutions with crypto investments.
In addition, the research mentioned a complete ban on PoW mining. Meanwhile, the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency supported the idea.
According to the study, some crypto assets may never align with the ESG (environmental, social, and governance) goals. The ECB cited the ongoing MiCA framework as evidence of the ongoing discussion about PoW.
However, it imposed several restrictions, especially for stablecoin issuers. They were to have sufficient reserves with a maximum transaction of €200 million daily.
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