Crypto assets are threatened by new regulations in the US: The White House wants to take action against the energy waste of Bitcoin – initially in cooperation, if that does not help also by banning PoW. Despite or because of the shift to PoS, Ethereum must fear stricter regulation: the US Securities and Exchange Commission (SEC) is investigating whether stake proceeds should be classified as dividends and whether the cryptocurrency should be considered a security. There is also trouble in Europe: NFTs are not NFTs in the sense of the MiCA regulation if they belong to series and collections – this has unpleasant consequences consequences.
Iin a first draft of the EU directive for cryptocurrencies (Markets in Crypto Assets, abbreviated MiCA), Bitcoin was threatened with a ban in Europe from 2025 – if the cryptocurrency did not say goodbye to the energy-intensive proof-of-work concept per thereafter. After a heated argument in the responsible committee, this regulation was deleted (reported IT-Finanzmagazin).
Biden wants to protect the environment
Now it threatens to be back on the table – but this time in the USA. The White House recently published the report “Climate And Energy Implications Of Crypto-Asset In The United States”, which among other things deals with the high power consumption of cryptocurrencies such as Bitcoin. Because of the harmful effects, the report makes a clear recommendation:
The Environmental Protection Agency (EPA), the Department of Energy (DOE), and other federal agencies should provide technical assistance and initiate a collaborative process with states, communities, the cryptoasset industry, and others to establish effective, evidence-based environmental performance standards for the responsible design, development, and use of environmentally friendly crypto asset technologies […] Should these measures prove ineffective in reducing the impact, the government should consider executive action, and Congress could consider legislation to limit or eliminate the use of high-energy consensus mechanisms for mining cryptoassets.”
The starting point is the Biden administration’s stated willingness to comply with the Paris climate agreement. The crypto industry’s high CO2 emissions currently stand in the way of this. Reduction of energy and water consumption as well as noise emissions are specified as concrete targets. Added to this is the stabilization of the electricity grid and the relief of communities that suffer particularly badly from the negative consequences of mining. DOE and EPA are encouraged to offer technical assistance to public utilities, environmental protection agencies, and the cryptocurrency industry to achieve this goal.
But that’s not all. The government should work with Congress to ensure that the DOE and other federal agencies establish energy efficiency standards that apply to mining hardware, blockchains, and other applications. In addition, the report calls for the publication of environmental data, including crypto mining locations, annual electricity consumption, greenhouse gas emissions and recycling rates for e-waste generated.
In addition to the threat of regulation, Bitcoin is also coming under pressure from professional users of the blockchain: the high energy consumption is contrary to the interests of companies geared to sustainability or ESG criteria – especially since the next pursuer successfully demonstrated the transition.
Ethereum is facing new challenges
The second largest cryptocurrency after Bitcoin, Ethereum, has only just said goodbye to the proof-of-work concept. According to the leading developers, more than 99 percent of the previous energy consumption should now be saved after the step called “fusion”. Various initiatives had called for mining to continue in a split branch (“fork”). There are also various altcoins that continue to rely on PoW. However, in light of the sometimes dramatic price losses of the past few days and the current high electricity costs, mining these cryptocurrencies is currently a negative business. The only thing that helps is turning it off.
With the validation of transactions according to the proof-of-stake concept, the Ethereum network does not need to fear any environmental protection requirements. Nevertheless, this cryptocurrency is also threatened by tighter regulation – precisely because of PoS.
“The Merge” and the efforts now being used have called the US Securities and Exchange Commission into action. According to the Wall Street Journal, its chairman Gary Gensler had noted that PoS-based cryptocurrencies could qualify as securities under the Howey test if profits from betting equal dividends. As a result, the crypto assets will be subject to the relevant disclosure requirements, customer information and the like.
Non-fungible tokens in the EU
Incidentally, this fate also threatens NFTs on the European market. During recent negotiations, the EU Parliament and the Commission had agreed that NFTs should not fall under the MiCA regulation. But there seems to be room for interpretation, which in many cases undermines the exceptional circumstances that the Commission wants.
In that context, the online media Coinbase referred to statements by Peter Kerstens, Advisor on Technological Innovation in the Financial Services Sector of the EU Commission, at the Korea Blockchain Week in early August. Therefore, the EU legislator understands NFTs “very narrowly”. Collections and series do not fall under this narrow definition, and thus not under the exception specified in the law.
In addition, information had to be sent out to, for example, customers, which in principle corresponds to a share prospectus. In addition, providers such as NFT exchanges must obtain regulatory approval to trade such cryptoassets. hello