Crypto miners pull out of China as Beijing intensifies its crypto crackdown

May 24, 2021, 11:31 AM UTC

China’s renewed campaign against cryptocurrency has mining and exchange operators retreating from the country.  

On Friday, Chinese Vice Premier Liu He called for a “severe” crackdown on and punishment of “illegal securities activities,” including crypto mining and trading to—as he put it—stem risks and ensure financial stability. The announcement sent cryptocurrency prices tumbling by double-digits over the weekend, and it has prompted several crypto mining and cryptocurrency exchanges to halt their operations in China.

Huobi, the world’s second-largest crypto exchange by volume, said in a statement on Sunday that it has suspended crypto mining hosting services and the sale of crypto mining machines in China, according to Coindesk. BTC.TOP, a mining ‘pool’ that allows coordinated groups to work together to mine new coins, announced a withdrawal from Chinese operations, citing regulatory concerns. Mine operator HashCow has indicated it will suspend new businesses in China and stop purchasing new mining rigs, according to a Reuters report.

The Friday order reiterated Beijing’s years-long anti-cryptocurrency stance, but it risks dealing a blow to the world’s cryptocurrency mining. Chinese miners account for 75% of the world’s Bitcoin hash rate—the total computational power used to mine and process crypto transactions—given the country’s access to specialized hardware and cheap electricity, according to new research published by Nature Communications.

The news prompted a crypto selloff and operators’ exodus from China, but experts argue that the new order will cause little long-term disruption; mining operations will just shift elsewhere.

China exodus

According to Huobi’s statement, the Seychelles-headquartered firm will suspend crypto mine hosting services for clients in China. It is the eighth-largest mining pool in the world, and contributes 4% of the world’s Bitcoin hash rate, according to, a site that tracks global mining pool data. Huobi is also temporarily blocking certain products in a few markets, including futures contracts and other leveraged investments to “protect investors” in the face of market shifts. While the company did not specify which countries would be affected, Decrypt noted that China is the only country where traders have reported restrictions.

Huobi declined to disclose further information to Fortune, and cited its plans to expand ‘Huobi Pool’—its mining operations—globally as impetus to “suspend…related services for new users in mainland China.”

The company will also stop selling crypto mining machines in China, and indicated it will turn its attention to business elsewhere, according to Coindesk.

Jiang Zhuoer, founder of BTC.TOP, says his firm is also looking beyond China, given the Friday announcement. Writing on Weibo, Jiang said that mining operations—including his own—will eventually shift to North America. He predicts that China-produced mining rigs will mainly be sold overseas in the long run.

Crypto miner HashCow, which owns 10 mining projects in Chinese provinces such as Sichuan and Xinjiang, wrote in a client note that it will suspend new businesses in China and stop buying new Bitcoin rigs, according to Reuters. HashCow did not return Fortune‘s request for comment.

Meanwhile OKEx, a top-ten crypto exchange worldwide, has limited its services for Chinese users, temporarily delisting its token ‘OKB’ on its peer-to-peer platform, writes Decrypt. OKEx didn’t return Fortune‘s request for comment.

The varied responses from top market players indicates “they [may] want the dust to settle before taking a directional bet,” says Justin d’Anethan, head of exchange sales at Diginex, a blockchain financial and technology firm.

Growing pains                      

China first indicated its anti-cryptocurrency stance in 2013, when it banned financial institutions from handling Bitcoin transactions. In 2017, China’s Central Bank outlawed initial coin offerings, or ICOs, and officials have decried the environmental toll of cryptocurrency mining, which is energy-intensive and often powered by coal. In April, China’s Inner Mongolia province outlawed Bitcoin mining, forcing mining operators to decamp for other regions in China and overseas.

In recent weeks, Chinese authorities have piled on regulation, framing the crackdown on cryptocurrencies as necessary to ward off financial risks and protect investors. On May 18, Beijing announced new rules that prohibit financial institutions and payment companies from providing services related to digital currencies. Then on Friday, it unleashed its latest statement against mining and trading operations.

As it reins in cryptocurrencies, China is promoting its own digital yuan, which Beijing sees as a powerful tool to track spending and as a possible challenger to the U.S. dollar’s status as the world’s preferred currency.

The latest round of regulatory action from Beijing “shows a continuing trend of stronger government action and serious consideration from regulators,” d’Anethan says. Such actions mean the still-nascent crypto markets are “feeling the growing pains.” But in the long run, they may make larger, institutional players feel more comfortable entering China, knowing they’re operating in a regulated and lawful space.

He predicts that miners displaced by the Friday action will relocate to nearby regions including Mongolia, Kazakhstan and Afghanistan.

BTC.TOP’s Jiang agrees: “The current situation of Bitcoin mining is not as bad as everyone thinks.” Jiang says mining farms may be the biggest victims of Beijing’s new action, but views the regulation as insignificant for individual miners and investors.

The markets will endure regardless, says d’Anethan. “The rest of the network of miners, excluding-China, must be rejoicing, as [the recent moves] weakens the competition from China.”

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