China has included cryptocurrency mining on its list of industries that it wishes to restrict or eliminate.
The ‘list’ was composed by the National Development and Reform Commission (NDRC) and cites these problem industries for not complying with the laws and regulations of the state, for being unsafe, or wasting national resources.
This move is likely due in reaction to the boom and subsequent bust that the cryptocurrency market went through between 2017 and 2018. During this time a handful of cryptocurrency mining companies like Bitmain and Canaan raised massive funds to manufacture mining equipment and mine cryptocurrencies, but are now in shambles.
According to Reuters, the NDRC has added cryptocurrency mining to its list of problem industries that it feels needs to be eliminated or at least better controlled. This would affect all proof-of-work cryptocurrencies, like Bitcoin (BTC) which are mined, as well as the major equipment manufacturers.
After setting all-time market highs across the board in late 2017, the cryptocurrency took an 85 percent nosedive. This bear market totally changed the basis for operational costs and available liquid digital assets. During this cycle, statistics showed that China was responsible for about 70-80 percent of the entire Bitcoin hashrate, utilizing the country’s cheap electricity.
Electricity consumption has always been a widely debated topic in the cryptocurrency space. Mining’s relatively high costs and energy utilized are some of the main reasons many cryptocurrencies are moving away from the proof-of-work model to proof-of-stake like Ethereum (ETH).
China’s recent aims to phase out cryptocurrency mining could be lethal for manufacturing giants like Bitmain Technologies and Canaan Inc.
Both companies had previously filed for IPOs and raised billions of dollars in private investing rounds. Neither has been successful in going public and both have recently let their IPO registrations lapse.
If these companies were forced to migrate their operations outside of the Chinese borders, the costs would likely be the kill shot to these already-crippled companies.
China is offering to hear out the public’s opinions and suggestions on the topic until May 7, although its already strict stance against cryptocurrencies doesn’t bode well for a positive outcome.
Do you think China will follow through with banning cryptocurrency mining? What effect would this have on the overall market? Let us know your thoughts in the comments below!