EU officials previously rejected an outright ban on crypto mining, but the Markets in Crypto Assets bill could require firms to report any potential environmental impact.
Fabio Panetta, an executive board member of the European Central Bank (ECB), proposed banning crypto assets with a significant environmental impact as part of efforts to address risks.
In written remarks for the Insight Summit at the London Business School on Dec. 7, Panetta said harmonizing taxation around crypto between global jurisdictions could address some of the energy and environment costs around mining and validation. He added that tokens “deemed to have an excessive ecological footprint should also be banned,” referring to proof-of-work assets in a citation.
Panetta added crypto markets were often at risk due to their “incredibly high leverage and interconnections,” citing the collapse of the FTX exchange:
“The inadequate governance of crypto firms has magnified these structural flaws. Insufficient transparency and disclosure, the lack of investor protection, and weak accounting systems and risk management were blatantly exposed by the implosion of FTX. Following this event, crypto-assets may move away from centralised to decentralised exchanges, creating new risks owing to the absence of a central governance body.”
Crypto-assets have become the bubble of a generation, says Executive Board member Fabio Panetta at the @LBS’s Insight Summit 2022.
Crypto-assets are not money. Many are just a new way of gambling https://t.co/S3YOJcq9QM
— European Central Bank (@ecb) December 7, 2022
The ECB official’s calls for additional regulatory oversight in a ‘Wild West’ crypto market followed the European Parliament Committee on Economic and Monetary Affairs approving the Markets in Crypto Assets bill, or MiCA, in October after extensive discussions. The crypto framework awaits final approval following legal and linguistic checks by EU lawmakers, with many expecting the policy to go into effect starting in 2024.
Related: How blockchain technology is used to save the environment
Associating cryptocurrency transactions and mining operations with environmental concerns has often been a rallying point for global policymakers. In the United States, the New York state legislature voted in favor of a two-year moratorium on crypto miners that use energy generated by fossil-fuel power plants. EU officials previously rejected an outright ban on crypto mining, but MiCA could require firms to report any potential environmental impact.