You thought crypto winter was bad? Try the real, potentially harsh winter about to hit Europe. Shutting down a key segment of the crypto industry could be one solution to the crisis, officials believe.
EU members should consider cracking down on crypto mining to help the region cope with a severe energy crisis caused largely by the disruption of the war in Ukraine, the body’s executive arm said this week.
“In case there is a need for load shedding in the electricity systems, the member states must also be ready to stop crypto-assets mining,” the European Commission said in a report.
Crypto mining energy consumption has “more or less doubled compared to two years ago,” the report said, adding that when "harnessing the use of cryptocurrencies and other blockchain technologies in energy markets and trading, care must be taken to use only the most energy efficient versions of the technology.”
The report called crypto’s proof-of-work consensus mechanism — which is used on the bitcoin blockchain, the most popular crypto ecosystem — “outdated.”
The commission cited the Ethereum network’s “long-awaited switch to proof-of-stake consensus mechanism,” which is expected to cut the second-largest blockchain’s energy consumption by 99%.
The switch, known as the Merge, was completed last month and "shows that the crypto world can move towards a more efficient system,” the report said.
Targeting crypto mining in a push to drastically cut energy consumption makes sense for the EU, given the difficulties of making similar reductions at major industries. Miners have cited the flexibility they have in shutting down and spinning up their operations based on the cost and availability of energy as an advantage compared to other industries, and argued that they can actually help stabilize grids and lower the cost of energy.
The EU has also been moving to introduce rules for the fast-growing crypto industry, highlighted by the recent approval of the Markets in Crypto-Assets Regulation, which is expected to become law in 2024.