China’s largest bitcoin-producing provinces have stepped up crackdowns on cryptocurrency mining in the latest sign of how global authorities are hardening their position in rapidly growing digital asset markets.
The country’s bitcoin mining operations, the energy-intensive computer puzzle-solving process that creates new units of virtual currency, have been on the decline since May, when the government upheld the ban on crypto transactions. -currency and warned about the risks of using them for payments. . Bitcoin prices have plunged after the announcement and are currently trading at around $ 30,000 below the April peak of nearly $ 65,000.
China’s latest intervention puts additional pressure on what was once one of the world’s fastest growing markets for trading and mining digital currencies. This comes at a time when many governments are carefully examining the industry’s effect on the environment and determining the types of financial oversight that should be applied to cryptocurrencies.
Earlier this month, global regulators called for digital currencies to be the toughest bank capital rules of any asset, the Basel Committee on Banking Supervision warning that the increasing use of crypto assets “has the potential to raise financial stability concerns.”
A wave of desperation hit the Chinese cryptocurrency mining community this week after officials at all of China’s mining hubs followed suit. Inner Mongolia and published other measures targeting bitcoin creators. The northern region had banned mining and set up a hotline to report suspected operations in May.
Sichuan, a hydropower-rich province in southwest China, has ordered the 26 largest local mines to cease operations while an investigation is underway, after a series of meetings of the energy bureau of the Local Development and Reform Commission, Chinese media reported on Friday.
The investigation, which will last until June 25, was seen as a warning by many bitcoin miners that it was time to pack up and move outside of China.
A video of employees at a large mine shutting down their computers’ servers seemed to capture the sense of finality and was widely shared by Chinese cryptocurrency enthusiasts online.
Due to its plentiful supply of renewable energy from a vast network of dams, Sichuan was seen as a place of last resort for mining operations kicked out from provinces that rely on coal-fired power plants for electricity.
The governments of major cryptocurrency mining sites in Xinjiang, Yunnan and Qinghai also announced their intention to shut down 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 peak greenhouse gas production by 2030 and to reach “carbon neutralityBy 2060.
Analysts have consistently pointed out that running the computers needed to produce bitcoin is bad for the environment. Cambridge University’s Bitcoin Electricity Consumption Index suggests that bitcoin mining consumes 133.68 terawatt hours of electricity per year, more than Sweden last year.
Advocates of crypto mining, however, claim that at least some of the energy used comes from clean sources, some of which might otherwise be untapped because they are in areas outside typical energy grids.
Despite steps taken in 2017 and 2019 to curb bitcoin trade and investment, China remained the world’s primary hub for bitcoin creation and accounted for up to 75% of global mining, according to estimates by before the crackdown.
Guan Dabo, an economist at Tsinghua University in Beijing and 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 more electricity supply clean had only ever worked as a temporary compromise.
“[Bitcoin mining] 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 faced with electricity shortages. ”