Naval Ravikant is widely admired as the Sage of Silicon Valley for his prophecies about trends in technology and society at large. In late 2020 he tweeted that “it’s only a matter of time until the narrative-industrial complex comes after crypto”. One does not need to be a conspiracy theorist to agree with him. If crypto, and particularly bitcoin, has one main problem it is its negative perception and demonization by large swathes of youngish, educated and (often) left-leaning people in the West who care deeply about climate change.
The BTC Echo Shockwaves
This widespread negative perception could now, in a sudden plot twist, make its way into EU legislation. According to credible information presented by the Germany-based news outlet BTC Echo the EU parliament is going to vote on a new proposed draft of MiCA on February 28th that will make crypto assets relying on PoW as a consensus algorithm illegal. Little information about the exact wording, scope and enforcement mechanisms of the proposal are known as of February 24th, but as the news broke on Thursday night it sent shockwaves through the EU community of crypto advocates, entrepreneurs and investors and instilled a mixture of surprise, anxiety and anger in many of them.
Banning BTC is both shortsighted and harmful
We at NYALA think this proposed legislation is both shortsighted and harmful.
It is shortsighted because an outright ban is almost never a good way to regulate an emerging technology that may have problematic consequences in the near-term but can also pay huge dividends in the future. Instead of banning PoW mining the EU should promote the very dynamic and fast-growing sector of green, sustainable PoW mining. Europe should strive to become a hub for this industry by attracting green miners and incentivizing them to relocate to Europe before they settle in North America. The discussion around bitcoin’s ESG status is very nuanced but suffice it to say that caring about climate exchange is simply not incompatible with being excited about blockchain technology and the most decentralized blockchain protocol in the world, bitcoin.
In addition to being short-sighted the proposed legislation is also harmful because it will have ripple effects (no pun intended) beyond the crypto industry and damage Europe’s competitive position as a newly attractive location for fintech startups. Let’s not forget that 2020 and 2021 were spectacular years for the sector, and succeeded in putting Europe back on the fintech map — one Austrian crypto exchange even became the first ever unicorn in the country, which is a remarkable feat.
Europe and Tech: It’s Complicated
It is almost cliché to say that beyond its globally competitive fintech sector and the much maligned Spotify Europe does not boast many cutting-edge tech firms, let alone tech giants. The continent famously missed out on a massive wave of innovation driven by the advent of the world wide web in the early 1990s and then again failed to capitalize on the emergence of big tech and data platforms in the first decade of the 2000s. Europe is a leader in setting stringent regulatory standards for global technologies developed by others but if it continues to be a naysayer on (blockchain) technology it will also lose the reputation around financial innovation that it struggled to build.
About NYALA
NYALA Digital Asset AG offers institutional investors and financial service providers product solutions and API services for digital assets in its core business areas of tokenization (issuance and registration of digital securities). With its own licenses for crypto custody, investment brokerage and financial portfolio management, NYALA is the leading crypto-as-a-service partner and one-stop store for tokenized securities issuance. Renowned banking partners such as Hauck & Aufhäuser and issuers such as Invesdor AG already rely on NYALA’s services.
