ECB report: ban on bitcoin mining 'likely'

According to an ECB report, a ban on bitcoin mining 'likely'.

According to an ECB report, a ban on bitcoin mining is 'likely'. In it, the authors compare Proof-of-Work (PoW) to combustion engines.

The ECB considers a mining ban for PoW-based cryptocurrencies 'likely'. This is the conclusion of a new report from the central bank. There, the authors focus mainly on Bitcoin's electricity consumption. This currently sits between the annual consumption of Spain and the Netherlands, the report says.

Because of rising energy prices as a result of the Russia-Ukraine war, lawmakers should 'take a closer look' at the productive use of their electricity resources, the ECB writes. Also, in connection with the push for climate neutrality, decisions should be made to ensure that the use of renewable energy sources is not affected by crypto mining.

To tackle the 'significant CO₂ footprint' of PoW-based cryptocurrencies, the central bank deems a number of government policies 'likely'. The ECB specifically wants to introduce a carbon tax on the ownership or transfer of Bitcoin.

Additionally, a full ban on mining is also conceivable. The authors point to China, where crypto mining has been banned for more than a year. This could slow the adoption of PoW-based cryptocurrencies while promoting greener alternatives like Proof-of-Stake (PoS).

Still, there is 'no notable mining industry' in the EU or eurozone, says Philipp Sandner, professor at the Frankfurt School of Finance & Management, to BTC-ECHO. For the economist, savings in other areas would be more effective.

''Moreover, Germany's overall electricity mix isn't better or worse than the Bitcoin electricity mix. Every kilowatt-hour we consume in Germany - TV, gaming, lighting - is roughly 50 percent green and 50 percent fossil. Shouldn't we start moving much faster there?''

ECB compares Bitcoin to internal combustion engines

To back its argument, the ECB cites the EU's recent ban on combustion- engine vehicles from 2035, and says that Bitcoin and other PoW-based cryptocurrencies are on par with that, while PoS is analogous to electric cars.

''Government agencies face a choice between promoting the crypto version of the gasoline car and restricting or banning the crypto version of the car fueled by fossil fuels.''

At the same time, the idea of banning PoW-based cryptocurrencies isn't new. During the MiCA regulation, a Bitcoin ban was on the table in the EU. The ban was not included in the final legislation.