Peter Kerstens, Adviser, DG FISMA, European Commission

Sustainability of crypto-assets and in particular their validation protocols are a key policy concern. This issue was much debated during the Mica negotiations, with some even wanting to go as far as prohibiting validation protocols that were deemed to be unsustainable. The European Commission was not in favour of this and ultimately there was no majority for a ban. But this does not take away that there are legitimate questions around for example the environmental and climate impact of (certain) crypto assets or blockchains. That is why Mica contains disclosure requirements, aiming at informing consumers and investors on the relative sustainability of crypto assets. It is not as simple as saying protocol x is good and protocol y is bad. You have to look at the energy consumption, the energy input, the source of the energy and whether it is renewable or not, whether it has climate or other adverse impacts. But you also have to look at the output in my view, for example can a value be placed on trust in a trustless environment, how many transactions can be validated for a given energy input, how does this compare to energy consumption of other technologies like card-based systems, etc. We do not want and we will not support any crypto-green washing, nor do we agree that crypto activity and blockchains are an environmental and climate disaster. Only by making fair and proper disclosures, based on solid methodology and (scientific) evidence, can consumers and investors take decisions based on their own sustainability preferences and priorities. We are all concerned about climate change and the environment at large. With the right information at hand, we can take the right decisions on what to engage with and what to avoid. I believe that ultimately the market will respond to this and will put those crypto assets that have better sustainability records ahead. Market-based approaches have shown to work much better than compulsion or prohibition. They require sound information for market participants to take responsible decisions. Casps should recognise this. They should not look at Mica – be it the sustainability or other requirements – from a compliance perspective only. They should also and preferably look at it as an opportunity to access the EU-wide market.
When we proposed Mica in 2020, we wanted to onshore responsible crypto and blockchain activity in the EU, because of the enormous opportunities blockchain technology and crypto assets hold for our economy and society. It really is about opportunity, rather than compliance. Just complying with Mica is a losing proposition and does not set you apart. Any Casp must comply, so there is nothing special in that. And being largely compliant or almost compliant really is nothing to be proud of.

Moreover, MiCA sustainability disclosures are just one step in the path to making the industry sustainable.

Joachim Schwerin, Principal Economist, DG GROW, European Commission

MiCA is a prominent example of the pro-crypto approach the Commission has been taken for a long time, starting in 2016 with declaring that blockchain as a breakthrough technology will be a positive innovation priority for all EU policy fields in the decades to come. This opportunity driven approach forms the core of Mica, but this does not mean that legitimate societal concerns, including those on sustainability, need not be addressed in a meaningful way. “Meaningful” in my opinion means providing verified information and reliable signals to crypto markets without unduly constraining the choice of validation protocol. In fact, scoring better purely on sustainability does not make a protocol better than any other overall, as many other factors play a role, but it can be an additional information that helps better match the preferences of those that find this criterion relevant.

We have known for a long time that compliance in particular requires clarity of rules, well educated actors that understand the relevant provisions in detail and technical standards that facilitate such understanding and establish acceptable benchmarks. The report outlines all of this clearly, and it demonstrates that these are moving targets under Mica that call for collective action. This learning requires joint public-private interaction, e.g. through dialogue and in sandboxes, Q&A formats, “living” legal commentaries online and similar fora and platforms. Here, much work remains to be done, but an increasing number of market participants are actively exploring and implementing this. I welcome this profoundly.

Not to be forgotten is the cost aspect. Most Casps are SMEs and have limited resources to do technical tests and/or accumulate data. They must not be overburdened with non-essential requirements and undue costs of compliance, and they should be able to resort to efficient and cost-minimising solutions. We did not choose to actively support a space that minimises the roles of unproductive intermediaries only to have them creep back in by adding excessive requirements for sustainability standards. As such, taking compliance with Mica on sustainability requirements seriously is essential, and commitment by the industry is proof of this, but there must be a positive reward for such an attitude. This reward is to keep compliance requirements clear and simple and any cost associated with this at the absolute minimum, so as not to have the tail wag the dog but the crypto dog wag the bureaucracy tail.