Despite the previously mentioned bans, China was still the world’s biggest bitcoin mining nation, with over three-quarters of all bitcoins mined in the world’s most populous country. The reported mining ban will therefore undoubtedly send shockwaves throughout the crypto world.
In addition to China’s existing hard stance on crypto related activities, there are new factors supporting a mining ban. One of the main motivations behind the ban is the electricity consumption caused by mining. According to the Digicomist, the global mining industry accounts for over 0.17% of all global electricity consumption, which represents more than 161 individual countries and with China mining three quarters of it all, the consumption levels are significant.
In light of many Chinese regions being rich in coal or hydroelectric power and the relative cost of electricity being so low, it unsurprisingly made it an ideal place for mining. Although hydro-electric power is relatively pollution free, coal is not. China had little choice but to shut the mining or otherwise appear hypocritical for endeavoring to clean the air, whilst letting Bitcoin mining to continue.
Although Chinese mining activity is undoubtedly draining the country’s electrical resources it has been a welcomed financial boost for some smaller local and regional governments. Mining companies have, in certain cases, partnered with local authorities, exchanging a portion of their profits for discounted electricity rates. This has been particularly vital in regions where traditional industries have been struggling.
Despite this, many other Bitcoin miners have illegally established their operations in remote locations without registering a company and have been ignoring Chinese laws that forbids individuals from buying electricity directly from power producers, rather than grid operators.
Contrary to reports however, the order from the People’s Bank of China does not explicitly call on regional governments to close down mining operations directly, it does nevertheless ask them to progressively ease them out. According to the FT, they state that this can be achieved through stricter enforcing of electricity consumption, land use, tax collection and environmental regulation.
The news has however prompted a quick response from prominent Chinese mining companies, opting to shift their operations abroad. Bitmain, the company behind the country’s two biggest bitcoin-mining collectives is now looking to set up its Asian headquarters in Singapore. BTC.Top, the third-biggest mining pool has also announced it will be moving facilities to Canada “because of the relatively cheap cost, and the stability of the country and policies”, according to founder Jiang Zhuoer. Countries such as Canada, Russia Iceland and eastern Europe, with cheap electricity, less stringent governments and colder climates (due to overheating hardware) are seen as the ideal choices.
Although some have expressed belief that the Chinese government is looking to clamp down on mining in an effort to create more regulated, state backed companies, there is little evidence to confirm this at this early stage. In the meantime, the development highlights just how China’s once-dominant role in the world of cryptocurrencies is declining, as policy makers clamp down.