China's crackdown on cryptocurrencies continues
With the recent ban of many cryptocurrency accounts on Weibo and the increasing crackdown on bitcoin mining, new restrictive policies are being enforced. Along with crypto trading, China's carbon neutrality goal has raised concerns once again this month. With China celebrating the 100th birthday of CCP, cryptocurrencies became an important topic.
China doesn't like having things they cannot control, and the whole cryptocurrency premise, especially of Bitcoin is that it is decentralized and cannot be controlled by anyone. To China, that means Bitcoin and other cryptocurrencies are the enemies of the state.
Mining Ban
It's worth noting that most of the Bitcoin network's hashing power, almost 75% , is from China. As one of the largest energy-consuming countries globally, China is a key signatory of the Paris Agreement. However, without appropriate interventions and feasible policies, the intensive Bitcoin blockchain operation in China can quickly grow as a threat that could potentially undermine the emission reduction effort taken place in the country.
It all started in Inner Mongolia and spread to Xinjiang and Yunnan Province. Apparently, someone in Guandong dropped a dime on Yunnan to the government, claiming that it was not getting enough electricity from the province. The government investigated and found the culprit: crypto mining.
Spokesman for the Yunnan Energy department confirmed to a number of sites that it wants all crypto miners to leave by the end of June. As we can learn from Sina finance (it's a rough translation)
"Illegal acts of industry, unauthorized power supply, evasion of scrapping of national transmission and distribution fees, funds and additional profits shall be suspended immediately upon discovery; serious investigation and punishment of illegal acts of power generation enterprises that use the amount generated to supply power to Bitcoin mining enterprises without permission for illegitimate benefits; seriously investigate and punish Bitcoin mining once found."
The mining hash rate has dropped significantly due to this decision causing Bitcoin not to produce blocks for nearly 1.5h. Sichuan has been the last standing bastion of Chinese mining, but miners there have been ordered to shut down.
Sichuan ban
On June 18th, Sichuan officially issued a document requesting power generation companies are required to immediately stop supplying power to any virtual currency mining and report the relevant situation on the 25th.
As @WuBlockchain reports
The document identified 26 large mining projects and required to be monitored and shut down. At present, the hashrate of Bitcoin and Ethereum has not fluctuated.
— Wu Blockchain (@WuBlockchain) June 18, 2021
Interestingly, as decrypt.co reports, Sichuan, a region in the Southwest of China, is popular among Bitcoin mining firms due to the surpluses of cheap hydroelectricity produced during China's rainy season, starting in May and ending in September.
We start seeing the effects of this decision today.
Due to the crackdown on Bitcoin mining in Sichuan, China, the current Bitcoin hashrate of the entire network is falling sharply, and multiple mining pools have fallen by more than 25%. If this execution is very serious later, the whole network may drop below 100E. pic.twitter.com/IXJ1NXaEic
— Wu Blockchain (@WuBlockchain) June 19, 2021
If the mining hash rate dropped by 20E amid Yunnan's ban, caused the network to slow down the production of blocks by nearly 1.5h. Drop that significant as below 100E, could extend that even further. But let's remember, Bitcoin block production difficulty restarts every two weeks, and such dropdown in block production times won't last forever.
Future
China plans to achieve carbon neutrality by 2060 and reducing carbon intensity, or the amount of carbon emitted per unit of GDP, by more than 65% by 2030. Having a ban on bitcoin mining will help for sure with the achievement. They even go as far as adding crypto miners who mine illegally to the "blacklist" of their Social Credit Systems.
China's decision can also be connected with another project that China is working on since 2014. Its own CBDC issued digital yuan. Bitcoin represents a different approach to what China wants to offer with its DCEP. I wrote a separate article that delves into this subject.
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