Chinese Crypto Mining Crackdown
Chinese central banks ordered to stop support of Crypto Mining, warning banks of environmental risk factors
In one of the world’s most important cryptocurrency markets, Chinese regulators have ordered the shutdown of bitcoin mining operations in some of the country’s most popular hotspots.
Sichuan was one of the latest casualties this week facing clampdowns on mining activities by the State Councils Financial Stability and Development Committee.
The Peoples bank of China (PBOC) has ordered Chinas largest banks not to provide products or services for cryptocurrency trading transactions [BBC], restricting the use of legitimate trading channels for crypto miners.
Chinese regulators have said the reason for stricter measures are “to prevent and control financial risks”, although some experts suggest other factors could also be in play.
Cryptocurrency trading has been banned in China since 2019 in a plea to regulate criminal activity such as money laundering. Yet, traders have continued to trade on the blockchain using bitcoin as currency.
Bitcoin as a currency cannot be traced by the country’s central bank or regulated due to blockchain technology. Said to be the safest platform for the exchange of information, bitcoin currency cannot be regulated, as it has been purposely created to exclude the inclusion of third parties. This includes governments and banks who have no control over the financial outflow.
The restrictions are also said to be a result of Beijing’s ambitious climate targets, which directly clash with the high surge in illicit coal extraction, being used to power some of its crypto mining activities. Xinjiang and Inner Mangolia regions use coal as a primary energy resource for cryptocurrency mining. This caught regulatory attention in 2019 and was the purpose for the ban in Inner Mongolia, to reduce carbon emissions.
Between September 2019 to April 2020, Chinas Sichuan province accounted for 30.13% of the worlds computing power for bitcoin activities [CGTN].
As a result, Bloomberg has predicted it will not be able to meet its Crypto needs through renewable energy until 2060.
Several provinces have been ordered to shut their mines, which included 26 in the Sichuan province last week.
The policy introduced in May of this year has since impacted market prices, with markets crashing this week and prices continuing to plummet since the announcement.
This is not the first attempt of China using heavy regulations to impose bans on virtual currency, but experts warn this crackdown may be more serious than the crackdown in September 2017.
It was only in March this year that China tested their own version of Crypto currency on the market. The digital Yuan aimed to make the currency available worldwide to reduce the dependency of the dollar which remains dominant on the world stage.
Yet the idea of government regulated cryptocurrency, may dampen the appeal of a digital currency, which has gained its popularity by being the only currency out their which cannot easily be tracked, seized or governed.
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About the author
Lisa Hanley
Journalist
Lisa Hanley is an In - house Journalist working for The BCI. With a Masters degree in Televison Journalism from City, University of London, Lisa has previously worked as a Freelance Producer and Journalist for London Live, PA Media and Thomson Reuters Foundation. Her experience varies from producing documentaries, films and podcasts, to producing news packages for television and voiceovers for radio.
