China has a plan to close mines that produce bitcoin because it makes electricity consumption more wasteful and risky. It agrees with the authorities’ assessment that digital currency (cryptocurrency) is not a strategic industry.
Several institutions ask the provincial government to “actively guide” companies in their respective regions out of the bitcoin currency mining industry.
The move was taken to encourage cryptocurrency miners to follow the closure of exchanges and ban the initial coin offering (ICO).
“Bitcoin mining consumes a lot of electricity and also encourages virtual currency speculation,” said a statement in the prohibition document quoted by CNBC.
“Mining operations run counter to efforts to prevent financial risks and encourage activity to deviate from the real needs of the economy,” said another statement.
As is well known, miners create new bitcoins by breaking complex codes to validate recent bitcoin transactions. Although it doesn’t use complicated computing processes, cryptocurrency mining relies on massive computing power to look more like a factory industry than a traditional high-tech business. Make sure you use good quality electric switches to mine bitcoins.
Several bitcoin miners operate in remote areas without registering their businesses. Some miners also ignore local regulations that prohibit consumers from buying electricity directly from producers instead of grid operators.
According to one Shenzen-based miner, Liao Xiang, digital currency mines in China account for three-quarters of bitcoin distribution worldwide.
So far, miners have benefited from cheap electricity prices in areas rich in coal or hydroelectric power, including in Xinjiang, Mongolia, Sichuan, and Yunnan.
The global cryptocurrency mining industry has consumed 0.17% of electricity consumption from over 161 countries, according to data from Digiconomist, a website that tracks the digital currency industry.
This ban on the mining of digital currencies is against China’s strategy in the technological realm. As is well known, China expresses its desire to become a leading country in artificial intelligence and robotics technology.
Internet finance task forces, including the People’s Bank of China, have previously led efforts to tighten peer-to-peer lending and online consumer lending regulations.
However, the request did not mention regional leaders to close operations directly but somewhat narrowed the room for movement through strict policies regarding electricity consumption, land use, tax collection, and environmental impact regulations.
With strict rules in place, Chinese cryptocurrency mining entrepreneurs are looking for ways to move their operations overseas, move factories, or sell them.
Given the price of electricity and the cold climate to prevent computers from overheating, countries like Canada, Iceland, Eastern Europe, and Russia could be the next destinations.
It is acknowledged by the bitcoin mining business that moving the “factory” to another country is not something easy.
“The difficulty is that regulations in other countries require time and capital to build massive data centers,” said Liao Xiang. “This requires a lot of electricity supply and industrial areas that do not have many regulations,” he added.
China itself is not a suitable place to set up a digital currency mine.
Many digital currency mines in the Bamboo Curtain Country are due to the well-developed supply chain of computer components used for mining.
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