China Determined to Further Drive Bitcoin Miners Out of Business
Chinese regulators might be mulling over further measures to drive Bitcoin mining companies and traders out of the country. The industry, which is already on the decline following previous moves, is facing renewed scrutiny as news outlets in the country are calling for more action to rein in what they consider an illegal industry.
Articles from influential state-run media outlets have signaled that further crackdowns could be launched to force out remaining cryptocurrency trading and mining activities from the country.
In February, the National Internet Finance Association of China warned against the risks of virtual currencies and initial coin offerings (ICO), and listed fighting such risks as one of its top priorities for 2018.
In the same month, a commentary in the People’s Daily, official newspaper of the Communist Party of China, called for much tougher regulations on “virtual currencies” and mining.
“The ‘crazy’ bitcoin has become an epicenter for various illegal financial activities […] there have been case after case of malicious trading, zombie miners and illegal gains in bitcoin,” the commentary reads. “The prompt use of regulations is conducive to building a highly-effective, safe financial system to prevent financial risks.”
The commentary added that China would take further actions to regulate cryptocurrencies, but did not offer any details.
Another article from the state-run Xinhua News Agency also pointed out that after recent tight regulations, some bitcoin traders and miners in China have “gone underground” and that “more thorough” regulations are necessary.
After the recent crackdowns, “there are still a lot of people who want to become millionaires overnight […] [there are] new ways of avoiding regulations,” the article said, pointing to domestic ICOs that relocate overseas but still do business in China, and miners, who despite fears of a ban, keep investing in new mining equipment.
“The banning orders should be upgraded and more intrusive supervision should be implemented,” the article aggressively demanded. Furthermore, the article, citing Yang Dong, a professor at Renmin University in Beijing, said that China should have a blacklist of cryptocurrency trading activities and seek cooperation with foreign governments.
Miners to be “guided” out of the business
This year, a leaked government document online indicated that China’s top internet finance regulator wants to regulate bitcoin miners in the country and eventually “guide” them out of the business.
In the document, the top Chinese internet finance regulator, known as the Leading Group of Internet Financial Risks Remediation, appears to be asking local governments to “actively guide” local bitcoin miners to an “orderly exit from the mining business,” by taking measures in areas such as electricity pricing, land use, taxes and environmental protection.
The document said that these “so-called mining companies” have “consumed a large amount of resources, while contributing to speculations on virtual currencies,” and deemed bitcoin mining to be running counter to China’s recent push to fend off systemic financial risks, and therefore a top priority for the Chinese government.
Following the media reports, Chinese officials both at the central and local levels denied banning bitcoin mining. Nonetheless, the reality on the ground is that these companies are now looking to relocate to more favorable locations overseas such as Iceland, Canada, and the US, to name a few, according to previous reporting by Cryptonews.com.
So whether the Chinese government issued a ban on bitcoin mining or not, one thing is clear: the bitcoin mining industry is losing its biggest base – once home to some of the world’s largest bitcoin mining companies and more than 70% of the global Bitcoin mining capacity.
A global decline in bitcoin mining?
Furthermore, China could now be paving the way for a global decline in the bitcoin and cryptocurrency mining industry, because coupled with China’s “unofficial” ban and potential for more actions, the industry also faces a barrage of challenges from rising costs to increased rates and overall tightening regulations making mining difficult.
Though mining companies could relocate to places with relatively favorable conditions, few can beat the environment Chinese miners enjoyed during the golden days of mining. Moving is also a costly and difficult endeavor for large-scale miners.
Some companies are already voicing complaints about higher costs, according to a report on the Chinese financial news site wallstreetcn.com. Citing shortages of resources due to “policy changes,” ViaBTC have raised their maintenance fee from 6% to 50% for its Antminer S9 cloud mining contracts, according to a company statement on January 11.
In addition, intensifying the competition to mine the increasingly scarce amounts of bitcoin left has put pressure on many miners and could potentially put many out of business.