The European Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted a draft report on Markets in Crypto-assets (MiCA) on 14 March, with 31 votes in favour, four votes against and 23 abstentions.
The legislation streamlines a set of rules which regulate cryptocurrencies across Members States, including requirements about the issuance of digital assets, the authorisation of crypto-asset service providers as well as consumer protection rules.
The vote on Monday split the Parliament over a point of contention regarding the sustainability of cryptocurrencies.
“In [the] vote, freedom, innovation and progress were on one side and prohibition on the other,” MiCA’s lead rapporteur Stefan Berger told Parliament Magazine in a statement on Tuesday.
Other left-leaning groups of the Parliament, like S&D and the Greens, were not pleased with the report as it was passed. They had advocated for an amendment to limit the use of certain kinds of cryptocurrencies in attempt to mitigate environmental impact.
The provision they had put forward targeted proof-of-work, or the energy-intensive computational method through which popular cryptocurrencies such as bitcoin and ether earn their value. This is the concept that defines the decentralised consensus mechanism on which these digital currencies are based.
If this amendment were to come into effect, it would mean that these cryptocurrencies would need to be shifted to a different consensus mechanism which uses less energy. Otherwise, they would no longer be accessible in the EU. While this shift is already on the discussion table for the Ethereum network, it is unlikely that Bitcoin would be able to support that.
“In [the] vote, freedom, innovation and progress were on one side and prohibition on the other" Stefan Berger, MiCA rapporteur
Due to the opposition from the other Parliamentary groups, this provision was left behind during the vote. After the results were published, S&D came out with press release on 14 March. In it, members expressed their disappointment.
“Today more than ever, Europe cannot afford to waste any unit of energy or help rich oligarchs hide their money,” wrote Jonás Fernández, S&D spokesperson on economic and monetary affairs.
“Our group is really disappointed about the lack of any ambition in the field of sustainability”, wrote Eero Heinäluoma, the S&D negotiator for MiCA. “The principles set in this respect by the report are very weak and completely negate the reality.”
For his part, lead rapporteur Berger told Parliament Magazine in an email that “voices from the crypto-asset industry and academia feared that the amendment by the S&D, Greens and Left could result in a de facto ban on proof-of-work. With [this] ban, however, Europe would harm itself and lose innovative power. This would not solve the issue of the sustainability of crypto-assets, but only shift it.”
Ondřej Kovařík, Renew Europe’s shadow rapporteur on this file, celebrated the rejection of the amendment. He wrote in a Tweet on Monday: “In the European Parliament’s Committee on Economic Affairs, we have just rejected a proposal calling for a ban on crypto trade, such as Bitcoin in the EU. MiCA It is very good news and a victory for common sense.”
Instead of the original amendment proposed to address these environmental concerns, it was agreed that the Commission will present MEPs with a legislative proposal to include in the EU taxonomy for sustainable activities any crypto-asset mining activities that contribute substantially to climate change, by 1 January 2025.
The MEPs who opposed the original amendment stressed that other industries, like video games, the entertainment industry or data centres, also consume energy resources that are not climate friendly. According to the Parliament’s press release, these MEPs call on the Commission to work on legislation addressing these issues across different sectors.
"Because it is the first of its kind, MiCA has the potential to serve as a global role model" Stefan Berger, MiCA rapporteur
Patrick Hansen, a business developer on decentralised finance applications, has been updating the crypto community on Twitter about MiCA’s progress over the past months. He tweeted after the vote that this was a “big relief and political success for the bitcoin and crypto community in the EU”.
MiCA is the very first European-level legislation on cryptocurrency regulation. Stefan Berger, the rapporteur for the report, told Parliament Magazine in an email correspondence that “because it is the first of its kind, MiCA has the potential to serve as a global role model”.
Many service providers within the cryptocurrency industry have anticipated this legislation. Jean-Baptiste Graftieaux, the Europe CEO of the longest-running EU-based cryptocurrency exchange, Bitstamp, told Parliament Magazine he welcomes the changes MiCA brings to the cryptocurrency industry.
“Now every country has a different regulatory approach, which makes things fragmented and complex and quite expensive from a legal standpoint. MiCA will be a very positive game-changer for the industry.”
The next step for MiCA is to enter trilogue between the EU Parliament, Commission and Council, where each institution defends its position on the legislation.
Berger wrote in his statement to Parliament Magazine: “This will be about the supervision of crypto-assets and what role the national competent authorities will play. I am optimistic that we will achieve a good result in the negotiations, because everyone involved wants an innovative, future-oriented and sustainable Europe.”
More details will be announced in the next plenary session of the Parliament on 23-24 March in Brussels.