China’s largest bitcoin-producing provinces have stepped up crackdown on cryptocurrency mining in the latest sign of global authorities tightening their stance on the fast-growing digital asset markets.
The country’s bitcoin mining operations, the power-hungry computer-aided puzzle-solving process that creates new units of virtual currency, have been on the decline since May when the government confirmed a ban on cryptocurrency transactions and warned of the risks of using them for payments. Bitcoin prices plummeted following the announcement and are currently trading at around $ 30,000, down from their April high of nearly $ 65,000.
China’s recent intervention is putting further pressure on what was once the world’s most dynamic digital currency trading and mining market. It comes at a time when many governments are scrutinizing the industry’s environmental impact and determining the types of financial oversight that should be applied to cryptocurrencies.
Earlier this month, global regulators called for digital currencies to have the toughest capital requirements for banks, with the Basel Committee on Banking Supervision warning that the increased use of crypto assets “has the potential to raise financial stability concerns.”
A wave of desperation hit China’s cryptocurrency mining community this week after officials at all Chinese Inner Mongolia mining centers followed suit and published further measures against bitcoin creators. The northern region had banned mining and set up a telephone hotline in May to report suspected cases.
Sichuan, a hydropower-rich province in southwest China, has ordered the closure of the 26 largest local mines 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, has been taken 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 online by Chinese cryptocurrency enthusiasts.
With its abundant supply of renewable energy from an extensive network of dams, Sichuan has been seen as the last resort for mining operations displaced from provinces that rely on coal-fired power plants to generate electricity.
Governments in leading cryptocurrency mining locations in Xinjiang, Yunnan and Qinghai also announced plans this month to cease mining operations.
Beijing is pressuring local governments to reduce energy intensity – carbon dioxide emissions per unit of gross domestic product – as China aims to achieve maximum greenhouse gas emissions by 2030 and “carbon neutral” by 2060.
Analysts have regularly pointed out that running the computers required to produce Bitcoin is bad for the environment. Cambridge University’s Bitcoin Electricity Consumption Index suggests that Bitcoin mining uses 133.68 terawatt hours of electricity per year, more than Sweden last year.
However, proponents of crypto mining say that at least some of the energy used comes from clean sources, some of which would otherwise have been wasted due to being in areas away from typical energy grids.
Despite measures taken in 2017 and 2019 to curb bitcoin trade and investment, China remained the main global hub for bitcoin manufacturing, accounting for up to 75 percent of global mining, according to estimates before the crackdown.
Guan Dabo, an economist at Tsinghua University in Beijing and author of a study that estimated the contribution of bitcoin mining to China’s carbon emissions, said that redistributing miners to a place with cleaner electricity is always only a temporary compromise worked.
“[Bitcoin mining] is doing 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 provinces are facing electricity shortages.”