Bitcoin suffers ahead of European parliament vote that could lead to its ban
Bitcoin and cryptocurrencies were in a corrective mode all weekend ahead of the European Parliament committee vote on Monday about a new regulatory framework for cryptoassets, called Markets in Crypto Assets (MiCA), which puts the Proof of Work (PoW) model under the spotlight. This could speed up the approval of a measure that industry executives say could virtually ban major digital currencies, such as Bitcoin and Ethereum, in Europe.
The world's largest digital currency remained in a tight trading range over the weekend, with highs just below $40,000 and lows around $37,000, pressured by risk aversion in global markets stemming from the war in Ukraine. As for the 'altcoins', Ethereum remains around $2,500 and the rest of the market leaves slight declines. The total capitalization shows a 1.3% drop to $1.72 trillion, according to CoinMarketCap data.
Not even a tweet from Elon Musk assuring that he does not intend to sell his Bitcoins, Ethereums or Dogecoins has offered the price boost that other interventions on Twitter by the Tesla founder have previously given to digital currencies. However, there has been a slowdown in the falls, which were sharper before the tycoon's social network post.
Regardless, the threat of restrictive regulation in the European Union (EU) is keeping investors away from the market. The European cryptoasset industry awaits the MiCA regulatory framework, which will go through various steps before 2024, when it is expected to be ready for approval, and the fact that it is shaping up to be more restrictive is causing an adverse reaction for digital assets.
'Bloomberg News' publishes a preview of the final draft of this law that will be voted on Monday in a parliamentary committee, and as foreseen, cryptoassets issued and/or traded in the EU "shall be subject to minimum environmental sustainability standards and shall establish and maintain a phased implementation plan to ensure compliance" with those requirements.
The reference to minimum sustainability, as well as the roll-out requirements, appear to be last-minute changes introduced to curb, or prohibit, the use of digital currencies that operate with the so-called proof-of-work consensus mechanism, as for example, Bitcoin and Ethereum.
An earlier draft did not mention the proof-of-work protocol concept, EU parliamentarian and cryptocurrency expert Stefan Berger of Germany's Christian Democratic Party commented in a tweet at the start of last week.
Proof of work is one of the main consensus mechanisms governing the Bitcoin blockchain. Bitcoin miners contribute computing power to the network, which secures and processes the blockchain, and are rewarded in Bitcoins for their contribution.