China, the world’s most populous country, has been a critical player in global finance and cryptocurrency mining. You can check Bitcoin Sprint to get an automated trading experience by accessing the best-in-class trading bots and trading strategies. In addition, the regulators had ordered local governments to “halt the construction of new bitcoin mines” following an investigation into possible environmental damage from heavy water and power use.
It is one more example of how China is aggressively regulating Bitcoin and cryptocurrency trading – domestically and in other countries where Chinese traders are active, like Vietnam. Users reported that cryptocurrency mining accounts for about 3% of the country’s electricity consumption. The growth rate in power demand from crypto miners has been estimated at 10% per month, far exceeding the average monthly increase in China’s overall electricity use.
Crypto mining is an energy-intensive process by which transactions on a blockchain network are validated by solving computational problems. Environmental impacts aside, crypto mining is costly, requiring specialized machines and huge investments. The government’s crackdown on crypto mining could potentially result in bankruptcies, job losses and migration from China to other countries. Let’s discuss everything you should know about the recent cryptocurrency mining ban in china.
Why Did China Ban Cryptocurrency Mining?
The country has an exceptionally high electricity consumption rate, making it a prime target for crypto miners. It means in the year 2018, the domestic power consumption increased dramatically from 17 – 19 TWh to more than 120 TWh in 2021. This figure represents 3% of China’s total electricity consumption, equivalent to 120 million households. Moreover, with the lack of regulations on cryptocurrency trading, the country’s banking sector is more exposed to potential security risks and Ponzi schemes perpetrated by fraudsters.
The country has an exceptionally high electricity consumption rate, making it a prime target for crypto miners. In addition, the country has been aggressive in its recent clampdown on crypto mining. As a result, local governments are reportedly searching for ways to shut down almost all Bitcoin mine facilities. Many miners were forced to close their businesses after local authorities denied them permits.
China’s Plan For a Zero-Emission Nation By 2060
China has recently launched a new initiative to help reduce its dependence on fossil fuels and cut its carbon footprint from fossil fuel-based energy sources by as much as 90% by 2060. It is part of a plan to “make China a zero-emission nation by around 2040 and achieve carbon neutrality by as early as possible”, according to Yi Xianrong, head of the National Energy Administration in Beijing. The goal is to move away from coal power plants, which account for almost two-thirds of the country’s total electricity generation.
The cities will invest more than $18 billion in boosting renewable energy sources such as wind, solar, hydropower and biomass. And as per the government, it is one of the prominent reasons behind the cryptocurrency mining ban in china. After India, china is the second biggest market for Bitcoin mining equipment in the world. However, recent restrictions on cryptocurrency trading may lead to an increase in coal use and power plants burning biomass.
What Regulations Came Into Effect After The Ban?
According to a Chinese newspaper, Xi Jinping demanded that “China should take tough measures to curb pollution immediately” and that “illegal mining will be dealt with severely.” Another report stated that Chinese authorities will “seriously” crackdown on illegal cryptocurrency miners, local news portal Sohu reported.
The country is already drafting new laws banning bitcoin mining altogether. According to Fan Wenzhou, an official at the National Development and Reform Commission, a countrywide ban on bitcoin mining is in the works. One of the significant outcomes of this ban is that many miners will shift their operations to Vietnam or other countries with low electricity costs.
China’s Ban on Cryptocurrency Mining: Will it Impact Bitcoin Price?
China has been one of the largest markets for Bitcoin mining, and the recent announcement to stop mining may affect the price of bitcoins globally. With China’s decision to curb power consumption in cryptocurrency mining, there will be more pressure on global bitcoin prices in the short term.
It can be considered negative news as demand for crypto miners will drop significantly. But it is good news for cryptocurrency miners as they can now mine more bitcoin units without significant changes in their mining hardware.