China is set to crack down on bitcoin mining in that country, according to a statement from the State Council’s Financial Stability and Development Committee (FSDC). The statement from the regulator is so severe that it’s speculated that the country will completely ban the mining of bitcoin soon.
According to China’s FSDC, that country’s government intends to “…crack down on bitcoin mining and trading behaviour and resolutely prevent the transfer of individual risks to the society.” That doesn’t bode well for the cryptocurrency in the short term at all.
Banning bitcoin mining
Li Yi, chief research fellow at the Shanghai Academy of Social Sciences, speaking to the South China Morning Post, said “The wording of the statement did not leave much leeway for cryptocurrency mining.” But, while the country’s regulator hasn’t outright banned mining for bitcoin, Li believes it’s just a matter of time. “We should expect the relevant departments, including law enforcement, to come up with detailed measures to ban bitcoin mining in the near future,” he added.
The Chinese government has several objections to bitcoin mining, and cryptocurrency in general. It has raised concerns over the currency’s role in various illicit activities, including money laundering and smuggling, but the energy cost of bitcoin is also on their minds. And with good reason — most of the world’s bitcoin is mined in China.
It’s estimated that as much as 75% of the world’s bitcoin is mined in China, and the global energy draw matches the power consumption of the Netherlands. Some companies have gone as far as purchasing their own power plants in order to mine bitcoin, while miners in China itself have moved to provinces using cheaper coal power in order to increase their profitability. It’s unlikely that China’s looming ban on the practise will have much effect on this behaviour — it’s expected that Chinese bitcoin miners will move their operations to Afghanistan, Kazakhstan or Mongolia if the Chinese government completes its current crackdown.