To promote more sustainable means of producing cryptocurrencies, the European Commission is developing an energy efficiency label in collaboration with international partners.
According to the EC, the energy consumption associated with cryptocurrencies has grown disproportionately higher than the rate of adoption they have seen over the past two years. The executive body is thus developing a framework for encouraging "the most energy-efficient versions of the technology," according to a draft proposal.
The global Influence of the EU
The EC hopes that by establishing a standard that clearly identifies how much energy is put into the creation of different cryptocurrencies, issuers will be more inclined to select the most economical options.
Bitcoin, the largest cryptocurrency, is mined using proof-of-work, which consumes as much energy as an entire nation. Moreover, proof-of-work, a method recently adopted by Ethereum, has seen its energy use drop almost entirely, by 99.9%, a rate usually associated with elections in dubious democracies.
Cryptocurrencies that utilize proof-of-work consume a great deal of energy, and the EU was close to banning the practice before deciding that crypto-asset providers should instead disclose the impact of each coin they offer. The EU contributes only 10% of the global amount of proof-of-work mining, but its policy actions can have a significant impact on the rest of the world.
A comprehensive regulatory framework for cryptocurrencies is in the final stages of production by the EU, the Markets in Crypto Assets (MiCA) legislation. EU financial services commissioner Mairead McGuinness recently urged US lawmakers to follow suit and contribute to the establishment of international industry standards.
The Energy Crisis in Europe
A report evaluating the climate impact of the cryptocurrency industry is also being prepared by the EU as part of its efforts to design an energy efficiency label. That report is expected to be released by 2025 as part of the EU's efforts to create the energy efficiency label.
Energy consciousness has also been influenced by an increase in the cost of fuel across the continent as a result of sanctions placed on Russia, which had previously exported cheap gas to several European countries prior to its invasion of Ukraine earlier this year. The EU will recommend that its member countries cease all crypto-mining activities if electricity supplies begin to dwindle during this winter's expected challenges.