The EU’s action plan appears to crack down on the energy consumption of crypto miners

Editor’s Note: With so much market volatility, stay tuned for daily news! Get caught up in minutes with our quick summary of today’s must-read news and expert opinions. Sign up here!

(Kitco News) – The European Commission has published an action plan for the digitization of the EU’s energy system as laid out in the European Green Deal and the REPowerEU plan. The action plan aims to “contribute to improving the efficient use of energy resources, facilitate the integration of renewable energy into the grid, and save costs for EU consumers and energy companies”.

Included in the plan are recommendations around cryptocurrency mining, and the commission suggests that crypto mining operations should be stopped in cases where “there is a need for load reduction in the electricity systems.”

The REPowerEU plan was unveiled in May after the Russian invasion of Ukraine. It was designed to help “quickly reduce [the EU’s] dependence on Russian fossil fuels by accelerating the clean transition and joining together to achieve a more resilient energy system and a true Energy Union.”

The plan set out a set of actions designed to “save energy, diversify supplies, rapidly replace fossil fuels by accelerating Europe’s clean energy transition, and smartly combine investment and reform.”

According to the recently published action plan, control of energy consumption in information and communication technology (ICT) is a key focus area. Cryptocurrency mining falls into this category.

Under the sub-category control of the energy consumption of the ICT sector, the commission recommended implementing “measures to increase the transparency of the energy consumption of telecommunications services and an energy efficiency label for blockchains.”

In a separate document titled “Commission Staff Working Document,” the commission noted that Europe represents roughly 10% of the hash power dedicated to cryptocurrency mining, led by Germany and Ireland.

The document said that the main source of energy consumption in the cryptocurrency sector comes from proof-of-work protocols such as Bitcoin (BTC), highlighting findings that “mining is not a prerequisite for blockchain and that it is possible to base blockchain technologies on consensus mechanisms that use far less energy than Proof-of-Work because they do not involve a mining process.”

Due to the global nature of Bitcoin mining, the working document called for the development of “technical tools to assess the power consumption and carbon footprint of cryptomining at [the] international level.”

For now, the European Commission has called on member states “to implement targeted and proportionate measures to reduce the electricity consumption of miners with cryptoassets [… and] also in a long-term perspective, to end tax breaks and other fiscal measures in favor of crypto miners.”

The executive branch of the EU also announced its proposal to introduce a rating system for cryptocurrencies according to environmental impact within the EU. The ranking system was first proposed in the EU’s Green Deal and was developed as a compromise on proof-of-work consensus mechanisms between decision-makers during the debate on the Markets in Crypto-Assets legislation in March.