Why Has China Intensified Crackdown On Bitcoin Mining?
China is all set to crack down on bitcoin mining. Know all about government policies. What is its effect on the global economy?
Bitcoin Mining In China
In its efforts to crack down on bitcoin miners China has intensified by putting out a notice that is calling for government task forces to actively guide in the closure of bitcoin mining operations. Thereby the notice according to a report in the Wall Street Journal calls for an orderly exit as it doesn’t mention a deadline and further states that the mining of bitcoin consumes a large part of electricity as also encourages a spirit of speculation in virtual currencies. This is seen to characterize bitcoin mining among activities that deviate from the needs of the real economy. Being asked to wield a policy axe, on the cryptocurrency government officials in China are citing or promulgating a regulation to limit various aspects of bitcoin mining including electricity consumption, land use, tax collection, and environmental regulations.
What Is The Importance Of China In The Bitcoin Mining Ecosystem
Playing an important role in the bitcoin mining ecosystem, China accounted for 80% of all mined bitcoins whereas the country offers several advantages thereafter the bitcoin miners need from cheap electricity to centralized mining operations with both factors helping sustain bitcoin’s price and example of it is the energy bills representing 90% of overall costs for bitcoin mining.
With plentiful hydropower and cheap coal China comes with power companies optimizing their operations during downtime. The centralization of bitcoin mining in the country some claim has led to the development of an efficient hash rate for the bitcoin and in turn, this helped maintain the constant supply of bitcoin as also ensured profitability for the miners despite the rising costs and fees.
Will The Policies Affect Bitcoin Mining Operations?
China’s crackdown is not a bolt from the blue and to be sure several prominent bitcoin mining operations have already moved out of the country and for example, Bitmain comes to be the world’s largest bitcoin mining pool setting up operations in Inner Mongolia as others are therefore moving to cooler clime like those of Iceland. Furthermore, the recent reports have come out that Canada is being expected to be a major beneficiary of the shift in Chinese policy and since then the government has not specified a deadline as it is likely that bitcoin’s price will surely not experience radically volatile moves due to the development.
China May Curb Electricity For Bitcoin Miners: Then Will The Prices Tank?
The People’s Bank Of China according to reports has outlined a plan to curb some bitcoin miner operations in a closed-door meeting as the plan involves investigating power consumption of bitcoin miners thereby determining whether their use of free or cheap electricity uses distorted power prices in those areas. As it comes to be stated by most studies and anecdotal reporting China is home to a majority of bitcoin mining operations as the country is reportedly home to 71 percent of the overall bitcoin mining pools.
The CEO of China-based BitmainJihan Wu claims that 70 percent of the mining rigs in the world are made by his company as it also owns the world’s biggest bitcoin mining facility in Inner Mongolia. Whereas according to Garrick Hileman, the University of Cambridge Research Fellow by far and away the country is where most of the mining is taking place in China. According to him, the biggest driver for miners setting up shop in China is that the country, therefore, offers cheap electricity courtesy to cheap coal as well as in some locations free hydropower as these miners are seen to be often setting up shop in such areas. Hereby the move benefits power companies as well because they earn cash by diverting what is the surplus or idle power to mining operations.
Bitcoin’s electricity use has however recently gained notoriety after the reports have outlined its massive and unsustainable power requirements where senior market analysts with Oanda Craig Erlam said that electricity usage will remain a significant challenge for in the years ahead. This move-in China is probably the response to these concerns. Hereafter Bitcoin’s price slid downwards as the news about the Chinese government’s actions came around as the price depends on the number of coins in circulation. Therefore, this crackdown on miners could potentially cut back the number of coins available in the market.
Final Conclusion On The Topic
While the chances of such an occurrence may be low, as the Chinese government’s actions are reserved for some miners, it is dependent on the miners selected for investigating and their scale of operation s which is a crackdown that may have a negligible impact on bitcoin’s price or even on energy use. It is alternately that they might even shift operations to neighboring Mongolia.