China’s largest bitcoin-producing provinces have stepped up their crackdown on cryptocurrency mining in the latest sign of how global authorities are tightening their stance on rapidly growing digital asset markets.
The country’s bitcoin mining operations, the energy-consuming computational puzzle-solving process that creates new units of the virtual currency, has been in retreat since May, when the government confirmed a ban on cryptocurrency transactions and warned about the risks of using them for payments. Bitcoin prices tumbled after the announcement and are currently trading at roughly $ 30,000 below the April peak of nearly $ 65,000.
China’s latest intervention puts further pressure on what was once one of the world’s most vibrant markets for trading and mining digital currencies. It comes at a time when many governments are analyzing the effect of the industry on the environment and determining the types of financial supervision that should apply to cryptocurrencies.
Earlier this month, global regulators called for digital currencies to carry the strictest bank capital rules of any asset, and the Basel Committee on Banking Supervision warned that the growing use of crypto assets “has the potential to raise concerns about the financial stability”.
A wave of despair hit China’s cryptocurrency mining community this week after officials from all of China’s mining operations centers followed Inner Mongolia and launched new measures targeting bitcoin creators. The northern region had banned mining and introduced a hotline to report suspicious operations in May.
Sichuan, a hydropower-rich province in southwest China, ordered the 26 largest local mines to stop operating pending an investigation, after a series of meetings by the Energy Bureau of the Development and Development Commission. Local reform, Chinese media reported on Friday.
The investigation, which will last until June 25, has been taken as a warning by many bitcoin miners that it was time to pack up and relocate outside of China.
A video of employees at a large mine shutting down their computer servers seemed to capture a sense of purpose and was widely shared by Chinese cryptocurrency enthusiasts online.
Due to its abundant supply of renewable energy from an extensive network of dams, Sichuan had been seen as a place of last resort for mining operations driven out of the provinces that rely on coal-fired power plants for electricity.
The governments of major cryptocurrency mining locations Xinjiang, Yunnan and Qinghai also announced plans for shutter mining operations this month.
Local governments are under pressure from Beijing to reduce energy intensity (carbon dioxide emissions per unit of gross domestic product), as China aims to reach maximum greenhouse gas production by 2030 and achieve “carbon neutrality. carbon “by 2060.
Analysts have regularly pointed out that running the computers necessary for bitcoin production is bad for the environment. The University of Cambridge’s Bitcoin Electricity Consumption Index suggests that bitcoin mining consumes 133.68 terawatt hours per year of electricity, more than Sweden last year.
Proponents of crypto mining, however, say that at least some of the energy used comes from clean sources, some of which may have been left unexploited because they are in areas outside of typical power grids.
Despite measures taken in 2017 and 2019 to curb bitcoin trade and investment, China remained the world’s leading hub for bitcoin creation, accounting for up to 75 percent of global mining, according to estimates prior to the crackdown. .
Guan Dabo, an economist at Tsinghua University in Beijing and the author of a study estimating the contribution of bitcoin mining to China’s carbon emissions, said that the reassignment of miners to a location with a cleaner electricity supply It had only worked as a temporary commitment.
“[Bitcoin mining] it does no good to national economic development or social development, ”he said. “On the other hand, it consumes a lot of electricity that could be used for other purposes, especially at a time when the provinces are facing power shortages.”