Could Tighter Chinese Digital Lending Restrictions Pose a Threat to Bitcoin Mining?

The China Banking and Insurance Regulatory Commission has sought public opinion on banks’ internet loans.  The stipulations cover a broad range of issues — including the maximum loan amount, repayment period, and the purpose of the loan. 

Tightening the Grip

The commission suggests that the maximum amount of credit offered to any single consumer should be capped at 200,000 yuan — or about $28,270. Balloon loans (those which are repaid in a single lump sum) must be capped at a term of one year.  The provisions would also restrict the usage of internet loans for home purchases, mortgage repayment, or investing. Restricted investments include stocks, bonds, futures, financial derivatives, and others.  Additionally, only qualified institutions would be able to lend — and banks would be restricted from certain third-party collection methods. 

Stronger Still

The Chinese government has been increasing control over its citizenry in recent months. Facial recognition methods have been met with widespread concern and the Chinese populace has largely been against it. Furthermore, the government has also cracked down on its citizens’ Twitter use overseas. The recent arrest and prison sentence of a University of Minnesota student for anti-government tweets sparked fervor.  Finally, China’s notorious banning of cryptocurrencies in September 2017 has increased government control over the financial industry in the nation. Bitcoin, for example, allows for transactions that do not pass through government hands — causing state concern. 

Bitcoin Miner Issues?

While Bitcoin use is banned, Bitcoin mining continues in China — with 65 percent of the global hash rate. The shift toward increasing levels of totalitarianism, however, could increase scrutiny over such activities.  Further, miners in need of capital from banks could face trouble obtaining loans. The proposed restrictions could make it very difficult to obtain the necessary capital for hardware upgrades by miners.  As Bitcoin’s third block reward halving occurs, Chinese miners could find themselves in need of capital — but unable to obtain it.