China’s regulatory clampdown on cryptocurrencies is sparking a mass exodus of bitcoin miners from the country, which has the potential to radically alter both global bitcoin and energy markets.
According to a document leaked online, China’s internet-finance regulator has recommended that local governments squeeze bitcoin miners out of the country through electricity pricing, taxation, property law and environmental regulations.
Until now, Chinese miners have capitalized on cheap, coal-fired electricity in regions such as Xinjiang and Inner Mongolia. The document calls for monthly reports on remaining bitcoin-mining operations in each region.
“Currently, there are some so-called ‘mining’ enterprises that produce ‘virtual currencies.’ They have consumed huge amounts of resources and stoked speculation of ‘virtual currencies,’” states the document, which is dated January 2. It is purportedly from the Leading Group of Internet Financial Risks Remediation – the internet-finance regulator in China – and was cited by Quartz.
The news is likely to trigger an immediate dip in bitcoin mining, which could create a shortage that would have a knock-on effect on prices, potentially leading to yet another price spike. The shift to more globally distributed mining operations may also drastically influence peak times for transactions, with a corresponding hike in transaction fees likely until the industry adjusts to the new dynamic.
China was once a driving force behind cryptocurrency mining, and accounted for more than two-thirds of the world’s bitcoin-mining operations until recently. The Chinese government previously banned initial coin offerings and halted trading of virtual currencies on local exchanges for a period in 2017.
Bitmain, which controls China’s two largest bitcoin-mining pools, is setting up headquarters in Singapore, and has launched mining operations in the US and Canada, according to the company’s co-founder Wu Jihan, as quoted by Bloomberg. BTC.Top, the third-biggest player in the Chinese bitcoin-mining scene is reportedly also opening a facility in Canada, while ViaBTC – number four in the rankings – has already started operations in Iceland and the US.
Transactions involving cryptocurrencies will not be significantly affected. However, the exodus of miners to locations as disparate as Iceland and Iran, or Canada and Russia, may potentially challenge the sector, which relies on energy-intensive computer networks to enable buying and selling.
“We chose Canada because of the relatively cheap cost, and the stability of the country and policies,” Jiang Zhuoer, founder of BTC.Top, said in an interview with Bloomberg.
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