In the voting, 32 members voted against the prohibition, while 24 voted in support of it.
This is a huge relief and a political victory for the European Union’s Bitcoin, Ethereum, and cryptocurrency mining communities.
Though ECB President Christine Lagarde was one of those advocating for MiCA’s approval, others had called for a prohibition on Proof-of-Work (PoW) mining prior to Monday’s decision.
The prices of Bitcoin and Ethereum surged modestly in response to the news, suggesting a good market reaction.
EU legislators reject a ban on PoW mining
On Monday, EU legislators approved MiCA, the EU’s crypto regulatory framework. One provision would have effectively prohibited POW mining in the EU.
A prohibition on PoW mining would have put Europe behind as other countries sought to stimulate innovation.
Legislators would next assess if cryptocurrency falls within the category of sustainable investment. The classifications may distinguish between PoW and other protocols, such as Proof-of-Stake.
Now, an amendment will be discussed that attempts to classify cryptocurrency as a long-term financial investment.
While the vote is not the last barrier for MiCA before it is passed, it is a source of reassurance for traders concerned about a crypto crackdown in the EU.
A separate governmental agency will also assess the environmental effects of PoW mining.
How PoW was introduced in MiCA
The MiCA was originally scheduled to be voted on by the ECON in February. However, the voting was postponed due to a strong protest from the crypto community in response to the PoW prohibition.
Despite Berger’s assurances to the public that the PoW topic would be removed from MiCA, it was reintroduced in a suggested draught prior to the vote on Monday.
Given the high energy cost of crypto mining, the environmental effect of PoW mining is the major topic of dispute in the bill.
A Solution to the PoW Problem
By moving to renewable or carbon-neutral energy sources, crypto miners have made these worries obsolete. Advances in chip production also aim to decrease the energy costs associated with mining.
The EU’s liberal stance on cryptocurrency echoes the similarly upbeat tone set by US President Joe Biden last week when he issued an executive order to promote crypto technology in the US.
EU legislators have pushed to expedite crypto legislation, citing possible abuse by businesses subject to economic penalties.
Proof of Work vs. Proof of Stake
Proof of Stake (POS) validates transactions by using miners that are selected randomly. By using a competitive validation technique, Proof of Work (POW) confirms transactions and adds new blocks to the blockchain.