China already banned crypto mining. Now it’s cracking down on any holdouts
On Tuesday, China’s government outlined a new phase in its bid to eliminate crypto mining operations from the country. Crypto mining is an “extremely harmful” industry that jeopardizes China’s pursuit of carbon neutrality, Meng Wei, spokesperson for China’s National Development and Reform Commission, a macroeconomic planning agency, said at a press conference on Tuesday.
Beijing’s harsh statement on crypto mining likely contributed to a crypto selloff on Tuesday that extended into Wednesday. The price of Bitcoin has dipped 2.9% in the past 24 hours while competitors Ethereum and Solana are down 4.6% and 6.7%, respectively. Experts have also attributed the cooling crypto markets to new U.S. government tax-reporting requirements for digital currencies and Twitter CFO Ned Segal’s comments that the platform does not plan to invest in crypto right now.
Meng’s comments suggest that China’s ban on cryptocurrency mining in June has not completely expelled miners from the country and that China is attempting to close any remaining loopholes to its ban.
Available data shows that crypto mining no longer exists in China and that China’s crypto mining ban completely upended the global Bitcoin mining industry. China went from controlling up to two-thirds of all Bitcoin mining in the world in April to not contributing to the industry at all as of July 2021, according to data compiled by the University of Cambridge’s Centre for Alternative Finance. And anecdotal evidence suggests that the vast majority of Chinese Bitcoin miners relocated their operations to places like Kazakhstan, the U.S., and Canada or simply sold off their equipment at discounted prices and left the industry.
But Cambridge acknowledges that its data is not perfect.
Cambridge relies on IP addresses to track the locations of Bitcoin miners, but miners are able to mask their locations using virtual private networks (VPNs) or proxy services. Cambridge states, for example, that miners in unknown countries likely route their IP addresses through Germany and Ireland because the two countries control unusually large portions of global Bitcoin mining despite little evidence that they host large mining operations.
Chinese state media wrote on Sunday that roughly 10% of the crypto-related businesses that operated in China before the ban are still operating in the country.
Tuesday’s statement suggests that Beijing is more determined than ever to rid the country of any crypto mining holdouts, especially in the wake of a countrywide energy shortage that it partially blamed on the presence of crypto miners.
Meng said that China’s government will step up efforts to investigate whether state-owned companies are continuing to support crypto mining. She also said government agencies from local to the national level will be responsible for monitoring and punishing state-owned firms found to be supporting mining activities. Meng did not specify what the punishments may entail.
Meng also said that Beijing would examine whether organizations that receive subsidized power from the state—schools, hospitals, community centers, and other public institutions—are involved in crypto mining. If the probes identify violators of China’s crypto mining ban, she said, Beijing would punish them with higher electricity prices.
“Virtual currency mining features high energy consumption and carbon emissions, and doesn’t play a positive role in industrial development and technological progress,” Meng said. “[Crypto’s] blind and disorderly development has a severe adverse impact on promoting high-quality economic and social development, energy conservation, and emission reduction.”
In another sign of its anti-crypto campaign, Beijing earlier this week expelled Xiao Yi, who served as vice chairman of the Jiangxi Provincial Committee of the Chinese People’s Political Consultative Conference, from his official position and kicked him out of the Chinese Communist Party for allegedly violating China’s crypto mining ban, among other offenses.
“[Xiao] abused his power to introduce and support enterprises to engage in virtual currency ‘mining’ activities that do not meet the requirements of national industrial policy,” China’s Central Commission for Discipline Inspection, China’s corruption watchdog, wrote in a statement on Sunday. (Xiao has not responded to the allegations.)
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