The cryptocurrency industry has been awaiting China’s decision on whether or not to outlaw the mining of digital currencies.
The Chinese government has already begun to crack down on cryptocurrency trading and Initial Coin Offerings (ICOs), but its new target is Bitcoin (BTC) mining. The ban could impact the crypto industry worldwide since China is home to the world’s biggest cryptocurrency mining farms and the leading market for mining equipment.
Mining Ban Looming
Earlier this month, China’s top economic planning body included cryptocurrency mining to the list of problem industries subject to complete ban and elimination.
The new rules are under public consultation until May 7. If they come into force, mining farms and mining equipment manufacturers will have to shut down operations in China as the manufacturing, sale, and use of mining equipment will be prohibited.
Although Bitcoin mining is an energy-consuming process, many analysts believe that the environment is not a major source of concern for Xi’s team. It’s all about politics.
According to Forbes contributor William Pesek, the government just wants to control things as tightly as possible, and clamp down on massive capital outflows and related loss of tax revenues. They see the potential benefits of being a blockchain leader, and yet it’s easier for them to ban the activity they can’t control.
Why It Matters?
The upcoming ban might impact the crypto industry globally as China accounts for about 70-80 percent of the world’s processing power related to mining. Miners take advantage of cheap electricity generated by its coal-rich regions and hydropower in some Chinese provinces.
China is home to the world’s major manufacturers of mining hardware, like Bitmain Technologies and Canaan. However, that might change if the government pulls the plug in May.
Chinese miners would have to abandon their farms and move operations to other locations. The costs of relocation might deal the final blow to businesses already suffering from a prolonged crypto winter.
Miners are one of the core elements of the entire Bitcoin ecosystem as they support its stability and safety. As a result, these developments might impede the growth of the BTC as well.
Not the End of the World
Not everyone is concerned about the proposed ban, however. Some experts believe that this might only make Bitcoin mining more decentralized.
Some companies and private miners will stay in China, going underground, but most of the hash power will move across the border. Non-Chinese miners would likely benefit from such developments.
Miners might shift to other mining-friendly jurisdictions offering relatively cheap electricity and mild climate. Bitmain and BTC.TOP have already begun looking into the USA and Canada. Other options include Iceland, Norway, and Russia.
Do you believe that China’s mining ban might deal a crushing blow to the industry? Let us know your thoughts in the comments below!