One of the EU’s top financial regulators has proposed banning the proof-of-work method of cryptocurrency mining, even as miners have switched to utilizing renewable resources.
Given that proof-of-work is responsible for cryptocurrency mining being so energy-intensive, vice-chair of the European Securities and Markets Authority (ESMA) Erik Thedéen has suggested banning the practice.
“We need to have a discussion about shifting the industry to a more efficient technology,” said Thedéen. “The solution is to ban proof of work.”
Proof-of-work mining a ‘national issue’
As director-general of Sweden’s Financial Services Authority (FSA), Thedéen also highlighted how crypto mining had become a “national issue.”
“The financial industry and a lot of large institutions are now active in cryptocurrency markets and they have [environmental, social and governance] responsibilities,” he added. As ESG concerns have pervaded the industry, many crypto miners have begun to use more renewable energy sources.“Bitcoin is now a national issue for Sweden because of the amount of renewable energy devoted to mining,” Thedéen said.
Unless action is taken, he fears that renewable energy may just end up going strictly to mining instead of replacing more polluting nonrenewable resources like coal.“It would be an irony if the wind power generated on Sweden’s long coastline would be devoted to bitcoin mining,” Thedéen said.
However, he stopped short of advocating for a wholesale ban on crypto, as was proposed by the FSA late last year. “[We call for] the EU to consider an EU-level ban on the energy-intensive mining method proof of work,” the Swedish financial regulator said in November. Both Kosovo and Kazakhstan have recently taken steps to reign in their own burgeoning crypto mining industry, after drawing in so many as to contribute to energy crises in both countries.
Miners should instead be encouraged to use the less energy-intensive proof-of-stake method, Thedéen concluded. “Proof of stake has a significantly lower energy profile,” he explained. According to its current schedule, Ethereum is in the process of migrating to using a proof-of-stake protocol.
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