Bitcoin mining in China has fallen to almost zero after recent state repression. This has already had a huge impact on the entire market, including (especially) Russia.
The changes concern not only enthusiasts, in the last month they are felt by everyone.
Until May of this year, half of the world’s bitcoin mining was concentrated in China. Since the spring, cryptocurrency has gradually been banned in the country, banks and payment services have stopped using it.
On September 24, the People’s Bank of China declared illegal all activities related to cryptocurrency. Including its extraction, purchase/sale and even storage and sale.
On September 28, China blocked other sites for tracking cryptocurrency rates (CoinGecko, CoinMarketCap and TradingView). Crypto exchanges were banned a few years before.
Alibaba has announced a complete ban on the sale of any mining devices on all its sites.
Since October, the Chinese authorities have added mining to the list of industries prohibited for investment. This applies to both Chinese and foreign investments.
Everyone ran from China. It has come to the point that Russia has now become the third country in the world in bitcoin mining. And the second place suddenly turned out to be in Kazakhstan, where for the last six months, seeing the seriousness of the party’s intentions, the Chinese have been exporting their mining farms.
Why does China need this
It would seem, what difference does it make if crypto enthusiasts (well, or respectable businessmen) mine different coins and bring dollars to the country. But the behavior of the Chinese leadership is not just a Russian “we forbid because we can.” They have three motives:
China is trying to become an environmentally friendly country. And I have signed several international treaties on this occasion. Xi Jinping said last year that the country intends to reach a peak in carbon dioxide emissions by 2030, then go down, and achieve carbon neutrality by 2060. But bitcoin alone threatened to disrupt these plans. It was expected that without political intervention, the annual energy consumption of blockchain in China by 2024 would amount to 300 TWh, (this is more than the entire consumption of Britain, and a third of Russia). This would lead to the emission of an extra 130 million tons of carbon.
The Chinese authorities believe that operations with cryptocurrencies can cause the withdrawal of money from the country. In September, they said that bitcoin, ether and other digital currencies disrupt the financial system and are used for money laundering by criminal gangs.
Perhaps the most important thing is that China views cryptocurrencies as a threat to its sovereign “digital yuan”, which has just recently entered a new experimental stage.
Digital yuan is electronic money that is issued by the People’s Bank of China and costs the same as ordinary paper banknotes in China. Work on the introduction of the digital currency began at the end of 2019. It was tested in the cities of Shenzhen, Suzhou, Chengdu and the Xiong’an New Economic Zone near Beijing. In October 2020, the cities of Shanghai, Changsha, Xi’an, Qingdao, Dalian and Hainan Province were added here. And from this November, the pilot project is already being released to the whole country.
After the bitcoin ban, the success of e-CNY is now guaranteed. 21 million private and 3.5 million corporate wallets with digital yuan have already been opened. The total volume of operations amounted to 34.5 billion yuan (about $5.3 billion). The government is very actively pushing its project. In test cities, they pay utility bills and pay fines. Lotteries are organized for people: 200 thousand citizens have already received 200 digital yuan for free.
There is no place for “too free” bitcoin in China’s internal affairs. He was kicked out of the country in record time.