Could China’s Mining Crackdown Actually Benefit Crypto?

The Details of the Chain Crackdown

China’s government dropped the whip on Bitcoin and crypto mining in May. Vice Premier Liu He hosted a group of finance officials in a meeting that decided the government would “clamp down on Bitcoin mining and trading activity” to achieve financial stability in the country. Later, a  statement was published on the government’s website reiterating the same.

Local governments in several crypto mining hotspots in the country have since swung into action. Officials in Changji, a prefecture under Xinjiang’s jurisdiction, told miners at the Zhungdong Economic Technological Development Park to wrap up their mining activities, per a government notice “seen” by The Block.

China’s Qinghai province has issued a notice outlawing crypto mining activities. The country’s Inner Mongolia region announced a ban on crypto mining as early as March this year. Meanwhile, Yunnan province’s Energy Bureau has signalled plans to shut down mining operations in the region by the end of June, according to state outlet Securities Times. And in Sichuan, authorities in the city of Ya’an have ordered miners to shut down. It’s unclear whether this decision will be reversed.

The government isn’t leaving any stone unturned in its censorship of crypto. Crypto users in the south Asian country are currently unable to access popular exchanges such as Huobi, Binance and OKEx on web services like Baidu, Sogo and Zhihu. Even on the Twitter-like Weibo platform, keyword searches yielded no fruits — with cryptocurrency accounts blocked.

China Not Flattering for Crypto

Even then, China’s association with Bitcoin and cryptocurrency was never the most flattering for the technology. At the core of the issue is the country’s notorious dependency on coal — a cheap source of energy, but one much-panned by environmentalists. Up until now, China has dominated the world’s Bitcoin mining, at one point even accounting for as much as 85% of the currency’s mining.

Out of the 60% of China’s Bitcoin miners, 40% relied on coal. This has recently been at odds with China’s climate ambitions, with the president having pledged to achieve net-zero emissions by 2060.

But it isn’t just China’s reliance on coal power that has stained crypto’s reputation. The country’s terrible human rights record has caused discomfort in some sections of the investment community. Lately, the Chinese government is inexplicably running roughshod over the rights of innocent citizens.

Bitcoin symbolizes freedom. It’s supposed to wrest power and control from governments and hand it to the people. For its biggest mining source to be engaged in human rights’ violation — that’s unconscionable.

Even without questionable energy sources or the issue of human rights, China’s less-than-rosy relationship with crypto is a problem. Witness how Bitcoin, Ethereum, and pretty much all existing cryptocurrencies went on a free fall after China’s announcement in May. As an economic behemoth, its cold embrace of crypto creates a climate of uncertainty and angst for the industry. Whatever the country says about crypto, the world listens.

What Shifting From China Could Mean

China ridding itself of crypto once and for all could be a blessing in disguise. When the biggest percentage of crypto mining is no longer done in China, and therefore not done using coal, environmentalists can stop hammering Bitcoin. Even if mining operations still consume tons of electricity, they will not rely so much on coal.

If miners are not selling their equipment, they’re fleeing China in droves. An insider told the Washington Post he predicts 60 to 70% of these miners will set camp in the USA and Europe. Some miners have also earmarked Canada as a favorable destination. In these and more places, there’s a trend towards the use of clean energy for Bitcoin mining.

Already, US miners are gravitating towards renewable energy, per Argo CEO Peter Wall. In Canada, several outfits are taking a stab at cleaner energy for Bitcoin, with solar, wind, gas and hydroelectricity in the running. Other places taking up green Bitcoin include Iceland, Sweden and DR Congo. In Norway, influential holding company Aker ASA will launch Bitcoin mining operations that will rely on clean power sources.

Such efforts are great for cryptocurrency in the long haul. In addition to a ‘crypto is for criminals’ reputation, the other thorn in crypto’s side is long-standing environmental concerns. If such concerns are alleviated, it can mean a great deal. It can even help return into the fold outfits that are influential for Bitcoin. Elon Musk indicated Sunday that once Bitcoin’s clean energy use crosses the 50% threshold, Tesla will revert to accepting Bitcoin.

I know — the community is over the Tesla head’s grossly irresponsible manipulation of the market. And like many have pointed out, Bitcoin needs no king. But the fact remains the markets are highly receptive to his musings — which he makes to his massive Twitter fanbase. And crypto newcomers and dilettantes probably view those musings as the crypto gospel.

Crypto doesn’t need this. If certain things change about how Bitcoin is minted, why not?

Final Thoughts

China has long see-sawed on cryptocurrency. With a tight grip on nearly every affair of citizens’ lives, the country cannot fathom an independent currency upsetting the order.

Also, it has promised lofty climate goals that it must work towards. None of those things suggest a happy existence of cryptocurrencies. But whatever the reason, China’s indecisive stance and strong ties with crypto has not done the industry any favour.

With a clean break from China, crypto can take on a new and much-needed life.