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China to crack down on cryptocurrency mining, boosting digital tokens after triggering global sell-off
China to crack down on bitcoin mining, according to a government cabinet announcement three days after regulators reiterated their ban on digital tokens in financial transactions, offering a punch that could weigh more heavily on the industry. cryptocurrency after last week’s outbreak globally. sale. The government “will crack down on the behavior of bitcoin mining and trading, and resolutely prevent the transfer of individual risks to society,” according to a statement from the State Council’s Financial Stability and Development Committee chaired by the deputy. Premier Liu He, Chinese President. high representative on economic and financial matters. China is the world’s largest cryptocurrency mining site, accounting for 65% of bitcoin’s hash rate, a unit of measure of processing power used by the bitcoin network to verify transactions and mine new tokens. of cryptocurrency, according to Cambridge Bitcoin Electricity Consumption Index estimates. The government, which has banned financial transactions of bitcoin and other tokens since 2019, has turned a blind eye to cryptocurrency mining farms in Inner Mongolia, Sichuan, Xinjiang and other parts of the continent until now. Do you have questions on the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new curated content platform with explanations, FAQs, analysis and infographics brought to you by our award-winning team. “The wording of the statement did not leave much leeway for cryptocurrency mining,” said Li Yi, chief researcher at the Shanghai Academy of Social Sciences. Locations of major cryptocurrency mining operations in the world as of 2018. SCMP Graphics alt = Locations of the major cryptocurrency mining operations in the world as of 2018. SCMP Graphics The latest statement, however, has always prevented an outright ban on cryptocurrency mining. He also did not specify the measures involved or the extent of this repression. “We should expect relevant departments, including law enforcement, to come up with detailed measures to ban bitcoin mining in the near future,” Li said. Bitcoin prices have fallen by 20 % to US $ 33,550 overnight after the committee’s statement on Friday, before rising modestly to US $ 37,481. The volatility of cryptocurrency prices was recently exacerbated by comments from billionaire entrepreneur Elon Musk, chief executive of electric car giant Tesla. The latest move against bitcoin mining came after three state-backed Chinese financial associations jointly issued a warning about the risks stemming from cryptocurrency volatility earlier this week. Some miners, however, seemed convinced that Beijing’s bark was stronger than its bite, as cryptocurrencies were still sold in the country on Thursday. “When all mining activities are banned in China, it will be a turning point for the fate of bitcoin, as much of its processing power will be removed,” said Li, researcher. The statement by the State Council committee on Friday, Li said, also highlighted the “green transformation of development,” representing the central government’s commitment to meeting its clean energy and emissions reduction targets. carbon. Cryptocurrency mining requires huge amounts of electricity to run the large arrays of computer servers needed to perform the complex calculations required for cryptocurrency transactions, as well as for the air conditioning needed to cool these facilities. Bitcoin can still be bought in China after China’s latest central bank crackdown promoted its own digital currency (CBDC). Not to be confused with cryptocurrencies, the digital yuan is a digitized fiat currency issued by the People’s Bank of China, equivalent in value to the country’s banknotes and coins. Chinese financial institutions, banned from handling transactions involving cryptocurrencies, are adopting the digital yuan. Various local and regional governments in China have already cracked down on cryptocurrency mining facilities. Earlier this week, China’s northern region of Inner Mongolia – one of the main cryptocurrency mining sites due to its low electricity prices – called for more comprehensive reports on these companies in order to eliminate energy-consuming activities in the region. Inner Mongolia began halting cryptocurrency mining operations in March. Bitcoin mining uses around 121.36 terawatt hours per year, which is more than the total energy Argentina uses, according to a recent report from the University of Cambridge. High consumption of bitcoin mining clashes with China’s desire to reduce carbon dioxide emissions by at least 65% by 2030, from 2005 levels, and then achieve carbon neutrality by 2060. “When China made carbon neutrality a national strategy, the massive consumption of electricity from bitcoin mining, which brought no practical benefit to the country’s economy like manufacturing industries and agriculture, will no longer be tolerated, ”Li said. This article originally appeared in the South China Morning Post (SCMP), the most trusted voice report on China and Asia for over a century. For more SCMP stories, please explore the SCMP app or visit the SCMP Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.