No, EU Isn’t Banning Crypto-Mining, But Russia Is

January 21, 2022
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The European Securities and Markets Authority has told VIXIO that comments from one of its vice-chairs in a recent interview about banning the mining of Bitcoin are not the position of the watchdog. However, further afield, Russia’s central bank has said it will introduce such a ban.

The European Securities and Markets Authority (ESMA) has told VIXIO that comments from one of its vice-chairs in a recent interview about banning the mining of Bitcoin are not the position of the watchdog. However, further afield, Russia’s central bank has said it will introduce such a ban.

This week, there has been a slew of regulatory action to crackdown on crypto — with the UK, Spain and Singapore all tightening their grip on crypto advertisements.

Now, a vice-chair of the ESMA has suggested to the press that the EU’s 27 member states should enact a ban on proof of work crypto mining, which is known for being energy-intensive.

In an interview with the Financial Times, Erik Thedéen warned that it had become a “national issue” in his native country of Sweden. Thedéen serves as chair of the Swedish financial authority.

The regulator took particular issue with the use of renewable energy that goes into mining Bitcoin. "It would be an irony if the wind power generated on Sweden’s long coastline would be devoted to Bitcoin mining," he cautioned.

According to figures released by the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining now accounts for 0.6 percent of the world’s electricity. What is more, Bitcoin's electricity consumption is equivalent to more than the total usage of either Norway or the Ukraine.

However, the headlines that have followed Thedéen's interview appear to be misleading, with the authority stating that he was not speaking in his capacity as ESMA chair.

As with other EU agencies, the board is composed of the heads of the national competent authorities in the EU, as well as the European Economic Area, and its chairperson is a revolving position. It is obliged to meet “at least” twice a year, according to ESMA’s website.

Although the EU may not be moving closer to a Bitcoin mining ban, Russia is.

In a newly released consultation, Russia’s central bank has said that it plans to ban Bitcoin mining.

Stating that this is a “best solution”, the central bank says “the current scale and further spread of cryptocurrency mining in the Russian Federation entail significant risks for the economy and financial stability”.

Cryptocurrency mining creates unproductive consumption of electric power, which threatens the power supply of residential buildings, social infrastructure and enterprises, and the implementation of Russia’s environmental agenda, the consultation says.

It also creates the demand for infrastructure needed to conduct cryptocurrency transactions, which the central bank believes exacerbates the negative effects of the spread of cryptocurrencies and creates incentives to circumvent regulation.

Thedéen’s intervention and Russia’s announcement coincide with the Bitcoin Mining Council’s (BMC) survey results on sustainable Bitcoin mining.

The BMC, a global forum based out of Texas, revealed that Bitcoin’s mining electricity mix increased to being 58.5 percent sustainable in the fourth quarter of 2021.

The conclusions drawn from the voluntary survey suggested that Bitcoin uses an inconsequential amount of global energy, is becoming more efficient, and suggested that if Bitcoin mining was eliminated, the global carbon footprint would be reduced by just 0.05 percent.

What regulators have said so far

Thedéen has a reputation for these kinds of interventions. In November, he and Björn Risinger, his counterpart at the Swedish Environmental Protection Agency, urged the EU to enact a crypto mining ban.

They also called for Sweden to introduce measures to immediately halt the continued establishment of crypto-mining production using energy-intensive methods in the country, and a ban on any company that trades or invests in crypto-assets using the proof-of-work method to describe themselves or their activities as sustainable.

Banning Bitcoin mining would not be unprecedented. Earlier in 2021, China became the first country to ban crypto mining, before later opting to prohibit all crypto-related activities.

Yet, despite an initial drop in mining activity following China's actions, mining soon returned to pre-ban levels as companies simply shifted production to other parts of the world.

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