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China moves to ban costly bitcoin mining
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China’s state planner wants to eliminate bitcoin mining, according to a draft list of industrial activities the agency is seeking to stop in a sign of growing government pressure on the cryptocurrency sector.
China is the world’s largest market for computer hardware designed to mine bitcoin and other cryptocurrencies, even though such activities previously fell under a regulatory gray area.
Cryptocurrency operations “mine” or create digital coins by solving complex mathematical puzzles, a process that requires large amounts of energy to run lightening-fast microprocessors and air-conditioning systems to cool computers.
The National Development and Reform Commission said on Monday it was seeking public opinions on a revised list of industries it wants to encourage, restrict or eliminate. The list was first published in 2011.
The draft for a revised list added cryptomining to more than 450 activities the NDRC said should be phased out as they did not adhere to relevant laws and regulations, were unsafe, wasted resources or polluted the environment.
It did not stipulate a target date or plan for how to eliminate cryptomining. The public has until May 7 to comment on the draft.
State-owned newspaper Securities Times said yesterday the draft list “distinctly reflects the attitude of the country’s industrial policy” toward the cryptocurrency industry.
Bitcoin traders said they were not surprised by the government’s move.
“Bitcoin mining wastes a lot of electricity,” said one Chinese bitcoin trader who declined to be named.
Last week, the price of bitcoin soared nearly 20 percent in its best day since the height of the 2017 bubble, and breaking US$5,000 for the first time since mid-November, although analysts and traders admitted they were puzzled by the surge.
Bitcoin, which accounts for around half the cryptocurrency market, was down by around 1.4 percent yesterday. Other major coins such as Ethereum and Ripple’s XRP fell by similar amounts. Traders in London said it was unclear how much the Chinese move was weighing on the market.
The cryptocurrency sector has been under heavy scrutiny in China since 2017, when regulators started to ban initial coin offerings and shut local cryptocurrency trading exchanges.
China also began to limit cryptocurrency mining, forcing many firms — among them some of the world’s largest — to find bases elsewhere.
Nearly half of bitcoin mining pools — groups of miners that team up for economies of scale — are located in the Asia-Pacific, a Cambridge University study said in December.
“Half of the network is probably located in China,” said Alex de Vries, a consultant with PwC in Amsterdam who specializes on blockchain and researches cryptocurrency mining. He added that the number of mining facilities in the world is still limited to several hundred.
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