The EU’s executive body is working to produce a metric that would express the energy efficiency of a cryptocurrency.
In collaboration with international partners, the European Commission is creating an energy efficiency label in an effort to promote more sustainable means of production of cryptocurrencies.
The EC claims that the energy consumption behind cryptocurrencies has become much higher than the growing adoption they have seen over the past two years. As a result, the executive body is striving to create a framework with which it can encourage “the most energy-efficient versions of technology”, according to a draft proposal.
EU’s global impact
Through the creation of a standard that would clearly differentiate how much energy went into the creation of different cryptocurrencies, the EC expects issuers to be willing to choose the most economic option.
Currently, proof-of-work, the method used to mine the largest cryptocurrency bitcoin, consumes as much energy as the entire nation. Meanwhile, proof-of-work, a method recently adopted by the second-largest crypto Ethereum, has seen its energy use drop by about 99.9%, a figure usually only seen in elections to questionable democracies.
The copious amount of energy expended by cryptocurrencies using proof-of-work led the European Union to ban the practice before it determined that crypto-asset providers should instead account for the impact of each coin they offer. should be disclosed. Although EU countries only contribute 10% of the total amount of proof-of-work mining globally, actions taken by the confederation could dramatically affect policy internationally.
In fact, the European Union is in the final stages of producing one of the first comprehensive regulatory frameworks for cryptocurrency, the Market in Crypto Assets (MiCA) law. EU Financial Services Commissioner Mairead McGuinness recently urged US lawmakers to follow suit and contribute to setting international industry standards.
european energy crisis
As part of efforts to create an energy efficiency label, the European Union said it will also produce a report assessing the climate impact of the cryptocurrency industry, which is expected to be released by 2025.
Another idea behind recent energy consciousness is rising fuel costs across the continent in the wake of sanctions imposed on Russia, which was the primary exporter of cheap gas to several European countries before the invasion of Ukraine earlier this year. , If electricity supplies begin to dwindle during a challenging winter, the EU will recommend that member states cease further crypto-mining activities.
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