The Chinese central bank does not intend to ban bitcoin mining despite recent rumors it would, according to Tencent. However, mining factory operators have reported on-site visits by authorities to check business registration status and electricity usage.
China prohibited ICO fundraising last September, then within weeks put a halt to online digital asset exchange trading after years of ambiguity. Since those events, the rumor mill has switched to focus on China’s last remaining large-scale crypto industry — mining.
The latest rumors suggested People’s Bank officials had held a closed-door meeting on January 3rd to impose a deadline for the closure of possibly all the country’s bitcoin mines. In the end, the reality was far less serious — it emerged officials had decided only to investigate “non-standard” electricity usage at mining operations.
Mining facility operators in Sichuan province told reporters of site visits to check registration documents and power consumption. The latter has been a sensitive issue for some time — bitcoin mining is most profitable where electricity is cheap, and electricity in China is often heavily subsidized or available at bargain rates thanks to operators’ deals with local officials.
Even the latest reports aren’t a new phenomenon. Back in November 2017, a local power company in Sichuan province also denied reports of a wider effort to ban cryptocurrency mining.
According to Tencent, one operator claimed bitcoin mines were simply using excess power that would otherwise go to waste. He said:
“Sichuan has the largest amount of water resources in the country. There are thousands of large and small hydropower stations with abundant power. Sometimes, because of over-supply of electricity, some of the water that should have been used to generate electricity We can only let it go, we call it ‘discarded water.’ Bitcoin saved this abandoned water. The water that would otherwise have been diverted from the hydropower station was used to generate power for bitcoin mines, huge gains were made by hydropower plants, and miners were given the coveted low-cost electricity.”
So for now at least, China appears not to be banning bitcoin mining on a grand scale. But operators are on notice to behave and expect to be monitored more closely in the future.
If this pattern sounds familiar, it’s because it is. Since late 2013, Chinese rumors have rolled out in a similar fashion: early reports spread of an outright ban on some kind of cryptocurrency activity… which is later revealed to be more scrutiny and enforcement of existing rules. Similar events occasionally took place in the exchange trading industry, right up to 2017’s final prohibitions.
Conclusion: the government does not wish to ban said activity, it simply wants to make sure its regulations are obeyed. That’s all.
It could well be a tactic to keep the bitcoin industry in line, and/or to dampen enthusiasm whenever digital currencies appear to be gaining mass popularity. It could also discourage potential new entrants to the market. In the meantime, though, bitcoin mining in China will keep chugging along.
What do you think the long-term plan is for bitcoin miners in China? Let’s hear your thoughts.
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