High-Ranking Regulator Calls for Ban on EU’s Proof-of-Work Mining

According to a senior official at the European Securities and Markets Authority (ESMA), it should be unlawful to mine cryptocurrencies using proof-of-work methods in the future. Coins produced via the energy-intensive mining process, as stated by the regulator, pose a danger to attempts to accomplish climate change goals, particularly those set out by the United Nations Framework Convention on Climate Change.

The European Union has leveled a fresh charge against Bitcoin mining: using an excessive quantity of renewable energy resources.

Officials from the European Union’s highest financial authorities have reaffirmed their call for an EU-wide prohibition on cryptocurrency mining based on the Proof of Work (PoW) principle, which they initially made public in 2015. One of the main criticisms leveled against cryptocurrencies like Bitcoin and Ethereum is that they promote renewable energy, which has been accused of impeding the transition to a low-carbon economy in the rest of the world.

In an interview with the Financial Times, Erik Thedéen, Vice-Chair of ESMA, stated that European authorities should consider outlawing proof-of-work mining and guide the sector toward the less energy-intensive proof-of-stake method of mining instead. Erik Thedéen spoke about his work with the Financial Times in an interview. According to an ESMA spokesperson, these efforts will aid the organization in decreasing its significant energy use.

According to Thedéen, who also happens to be the director-general of the Swedish Financial Services Authority, this is a “national concern” for the whole country. Earlier this month, he and Björn Risinger, the director-general of Sweden’s Environmental Protection Agency, stated that they would initiate the first judicial challenge against the European Union’s restriction on evidence-based mining.

In addition, Thedéen said that the industry must “become more efficient” in terms of its energy use. If the sector continues to use more energy, he claims that the firms attempting to adopt proof-of-stake would be mistreated and that this might result in a decline of mining and currency supply. It would have the effect of depressing the value of cryptocurrencies, although Thedéen feels that this is not the intended outcome of his project. “We are not attempting to destabilize the market,” he said. “We want to be of assistance.”

In a statement, Thedéen said that this policy is founded on the notion that there is no need for a significant number of currencies in circulation since the vast majority of tokens may be used as payment and will not have their value grow when used as payment. He also said that his firm does not want to impact the Bitcoin price since doing so may lead to a lack of faith in other digital currencies, which would have a detrimental impact on the value of those currencies.

In the interview, Thedéen said that proof-of-work is not only a waste of energy, but it may also pose a security risk to the system. Proof-of-work miners are said to be more prone than their counterparts to participate in unlawful activities since they are rewarded with cryptocurrency in exchange for their efforts in mining.

They feel that proof-of-work is an “unwise investment for the future since it uses a lot of energy and poses an unneeded security risk,” Thedéen said. He explained that proof-of-work miners are more inclined than their peers to participate in unlawful acts since they are rewarded with cryptocurrencies for their efforts.

As an additional point of clarification, Thedéen said that proof-of-work is unsuitable for anonymous transactions since it requires users to develop genuine identities to mine cryptocurrency. The anonymity of digital currencies, he said, was one of the most serious challenges the business was facing; nevertheless, he had no view on whether the regulation reform proposed by his organization would solve this issue.

Upon being asked about a cure, Thedéen said, “The answer is to make it illegal to provide proof of work.” She emphasized that proof-of-stake encryption consumes far less energy than other forms of cryptography, such as public-key cryptography. As the regulator put it, “we need to have a debate about shifting our sector to a more efficient technology.” In his statements, Thedéen, on the other hand, has made it plain that he is not in support of a complete cryptographic restriction in general.

Those opposed to cryptocurrency mining have often cited the practice’s rising environmental effect as a reason for their opposition. Because of President Xi Jinping’s commitment to carbon neutrality, Chinese authorities initiated an anti-coal campaign in May. Increasing the quantity of renewable energy used to power bitcoin mining equipment has become a primary focus for many bitcoin miners, who have put this as a high priority in their operations. Erik Thedéen, on the other hand, has the opposing point of view, stating, among other things.

“It would be an amusing twist on the notion of renewable energy to mine bitcoins using the wind power provided by Sweden’s extensive coastline to create electricity. “He believes that bitcoin is a “financial bubble” that will collapse at some point in the near future. As a result, he feels that bitcoin’s finite supply, and consequently the issue of deflation, is the most serious threat to the currency.

If the cryptocurrency had a limitless supply, it would be more enticing to invest in. It’s difficult to predict if bitcoin will continue to exist as an asset class in the long run. However, it’s important to remember that bitcoin is only one of several cryptocurrencies available to users. Thedéen’s remarks come when the Swedish government is attempting to push through an upgrade to the country’s existing “crypto tax,” which was first implemented in July of last year.

In November last year, the Swedish central bank examined various solutions for regulating cryptocurrency mining at a conference with officials from financial services businesses and industry organizations. In March, the central bank issued a warning about “risks associated with virtual currencies,” emphasizing that they are not legal cash in Sweden and that they are subject to market fluctuation as well as criminal exploitation.

Due to the increase of wind and solar energy capacity in Sweden and Norway, mining companies have relocated to these nations, which are now considering whether or not to support Sweden’s renewable energy policy. Consider the following scenario: if nothing is done, a significant amount of renewable energy will be diverted away from assisting traditional services in their transition from coal-powered energy sources and used to mint digital money, rather than helping traditional services in their transition away from coal-powered energy sources.