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Bitcoin
TechPolicy

China to crack down on mining of cryptocurrencies, delivering a one-two punch to digital tokens after triggering global sell-off

  • The State Council, China’s cabinet, has targeted bitcoin mining enterprises for the first time
  • The latest initiative seeks to protect the country’s financial system, as well as meet its clean energy and reduced carbon emission goals

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Beijing will intensify the crackdown on bitcoin mining to protect the country’s financial system, as well as meet its clean energy and reduced carbon emission goals. Photo: Reuters
Iris Deng
China will crack down on bitcoin mining, according to an announcement by the government‘s cabinet three days after regulators reiterated their ban of digital tokens in financial transactions, delivering a one-two punch that may further weigh on the cryptocurrency industry after triggering last week’s global sell-off.

The government will “crack down on bitcoin mining and trading behaviour, and resolutely prevent the transfer of individual risks to the society”, according to a statement by the State Council’s Financial Stability and Development Committee chaired by Vice-Premier Liu He, the Chinese president‘s top representative on economic and financial matters.

China is the world‘s largest cryptocurrency mining location, accounting for 65 per cent of the bitcoin hash rate, a unit of measure for the processing power used by the bitcoin network to verify transactions and mine new tokens of the cryptocurrency, according to estimates by Cambridge Bitcoin Electricity Consumption Index. The government, which has banned financial transactions of bitcoin and other tokens since 2019, had turned a blind eye towards the cryptocurrency mining farms in Inner Mongolia, Sichuan, Xinjiang and other mainland locations until now.

“The wording of the statement did not leave much leeway for cryptocurrency mining,” said Li Yi, chief research fellow at the Shanghai Academy of Social Sciences.

Locations of the world’s major cryptocurrency mining operations as of 2018. SCMP Graphics
Locations of the world’s major cryptocurrency mining operations as of 2018. SCMP Graphics

The latest statement, however, still stopped short of an outright ban on cryptocurrency mining. It also did not elaborate on the measures involved or scale of this crackdown.

“We should expect the relevant departments, including law enforcement, to come up with detailed measures to ban bitcoin mining in the near future,” Li said.

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