Chinese government to clamp down on miners. Source: Coin Bureau
Since 2017, Crypto has technically been banned in China. However, the miners were allowed to create cryptocurrencies so long as there were no retail traders involved.
Over 65% of global mining hash power is concentrated in China and it is directly related to transaction times and costs. Every time the Chinese government threaten to close in on the miners, there is a fall in hash power. This is a result of the miners trying to avoid regulatory risk. These falls lead to delays in transaction times and an increase in transaction costs.
The ‘latest’ news to come out suggested that the Chinese government were not only planning to clamp down on those who were talking about crypto on social media, but they would also be closing in on the miners.
This is not new news.
Chinese government to clamp down on miners. Is it a coincidence that this old news has now re-surfaced?
This year China launched their new digital currency and it allows its account holders to open a digital DCEP wallet on their ABC app. With this app they can top up the balance and use it to pay for services and products, including at various supermarkets and restaurants.
I believe that it is no coincidence that the reminder of banned cryptocurrencies re-surfaced as China push their digital coin.
On May 21st the Chinese vice premier said the government would “crack down on Bitcoin mining and trading behavior”. As a result of this, the price of Bitcoin immediately fell by 6%.
For the Chinese government to filter out their competition, they must limit the amount of BTC that the miners can make.
Bitcoin and the Environment
The adoption and use of hydro-power to mine Bitcoin is widely present in China. However, during the dry months this energy source is inconsistent and unreliable. There are rumours that an increase in illegal coal mining is happening across China due to the increased demand of Bitcoin.
The miners have been known to move their operations to various provinces that use coal. This causes a big problem for the environment.
Due to the inconsistency of the Chinese government, constantly changing their minds re the mining of cryptocurrencies, there are rumours that many miners are trying to sell up or ship out of China.
Is this news good or bad for the future of crypto?
As the miners move their operations overseas, we are likely to witness a temporary fall of hash power.
Temporarily, things could become messy in the world of cryptocurrencies, however, many people believe the move will be highly beneficial to the future of crypto.
As the miners relocate, they will most likely move to a country that is much more stable from a political point of view. This is not only great for the miners, but it’s beneficial for the ecosystem. The Chinese government will have substantially less control over the miners. BTC mining will be more stable and the BTC network will no longer be as centralised.
In terms of environmental impacts, China currently uses over 53% of the world’s coal energy production. If the miners move abroad to greener environments, they will have the opportunity to use more sustainable energy sources.
This will have a huge positive impact on the environment. If energy comes from sustainable sources, it doesn’t matter how much is used.
The relocation of Chinese miners could be a key factor in the future of a ‘greener BTC’. We should bare in mind that sustainable energy sources come with increased unpredictability.