In recent days a number of conflicting reports have surfaced pertaining to the stance of China’s government with regards to bitcoin mining. Last week, Bloomberg reported that the People’s Bank of China (PBOC) had met to discuss curbing mining operations in China, whilst Chinese media reports denied such – however, it has since emerged that the local government of Xinjiang province has mandated an “orderly exit” of its bitcoin mining industry. Despite widespread speculation that the long-feared Chinese crackdown on cryptocurrency mining may have begun, the establishment of international facilities on the part of leading mining pools has led to analysts predicting that much of the bitcoin mining industry will be able to weather a Chinese regulatory crackdown.
PBOC to Limit Power Consumption of Bitcoin Mining Industry
On the 3rd of January, Bloomberg reported that “people familiar with the matter” had stated that the PBOC will take action to limit the power consumed by bitcoin miners. The source stated that there is growing concern among Chinese officials that the energy-intensive requirements of the large-scale cryptocurrency mines are disrupting the distribution of power as intended by the central government.
In November, a document surfaced suggesting that a state-owned power company in Sichuan would seek to crack down on bitcoin mining, however, the company stated that the letter had been misconstrued due to translation errors, and that such pertained to “fail[ure]s” of “small hydropower stations” to “give priority to… the local… electricity demand.” Later that month, news.Bitcoin.com met with the manager of a bitcoin mining farm in Sichuan, whose comments further suggested that local power companies may be operating beyond the directives of the central government.
“When we first met people at the hydropower station, we told them we were a cloud computing company, but the manager of the hydropower station laughed at us and said ‘Bullshit, I know you people came here to mine bitcoin. Just tell us what can we get’. As to local government, we don’t have to meet with any officials, the station will help coordinate. And who can get the right to set a mining factory? The rule is very simple: first come, first served.”
Chinese State Media Denies Allegations of Mining Crackdown
State-owned Chinese media immediately sought to dismiss allegations of an imminent crackdown targeting the mining industry. On January 4th, an article published by Caixin claimed that “The Central Bank did not hold an Internal meeting on January 3rd,” and that “since November 2017,” the objective of official policy has been to “encourage” mining operations.
The article, however, asserted the Chinese state will “no longer give any mining incentives, including taxes, electricity, land, etc“ – apparently confirming, at the very least, that the central government will seek to tighten control over the distribution of electricity within provinces at a local level.
Xinjiang Province Mandates “Orderly Exit” of Cryptocurrency Miners
Yesterday, news.Bitcoin.com reported on a document written prior to January 5th indicating the desire of Xinjiang Province regulators to expel cryptocurrency miners from its jurisdiction. The document states “To curb financial risks and encourage the real economy, approaches must be taken to guide miners toward an ‘orderly’ exit from the business,” and mandates that mining companies submit status reports before the 5th of each month.
A separate document originating from the Financial Market of the PBOC states that “Local governments shall coordinate with multiple departments to take actions concerning electricity price, land use, tax and environmental protection in an effort to guide miners orderly exit.” Although the extent to which the policy of Xinjiang Province will be replicated in other jurisdictions, many are speculating that a Chinese mining crackdown may be currently underway.
Leading Mining Operations Relocate to Establish Operations Overseas
Some analysts are predicting that the actions of Chinese regulators may have little effect on many heavyweights of the mining industry, as many leading mining companies announced their intention to establish operations internationally, following China’s crackdown on cryptocurrency exchanges that was initiated earlier in 2017.
In October of last year, reports indicated that Bitmain would be opening a regional headquarters in Singapore, following its establishment of operations in the United States and Canada. Other leading mining companies reported to have set-up operations abroad include the third largest mining pool, Btc.top, expected to establish operations in Canada, and the fourth largest mining pool, Viabtc, which now operates facilities in Iceland and The United States.
What do you think the impact of Chinese crackdown on mining would be? Share your thoughts in the comments section below!
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Author: Samuel Haig