China says Bitcoin is a waste of time. Now he wants to ban mining

The Chinese miners of Bitcoin have for a long time incarnated a contradiction. The cryptocurrency trade is illegal in the country; initial coin offers, used to fund new blockchain projects, are prohibited; and Chinese banks can hardly touch that. And yet, the country remained the epicenter of global cryptocurrency, home to more computing power used to hit new bitcoins than any other country.

The Chinese government has now proposed to ban mining.

On Monday, the central planner of the Chinese state, the National Commission for Development and Reform, included mining cryptocurrencies in a list of 450 hazardous activities and requiring elimination. Mining is the process of validating transactions on blockchain networks, rewarding cryptocurrency, and has become known for the generation of electronic waste and the consumption of huge amounts of electricity. The proposed ban, which was originally reported by the Morning of South China, could come into effect after a public comment period ending May 7.

The proposal, if adopted, could take a long time to have a lot of impact, says Katherine Wu, an independent badyst of the crypto industry. It notes that this differs from previous crackdown measures on cryptocurrencies, which had taken more direct measures. In 2017, for example, the government ordered that exchanges, in which people buy and sell coins, dissolve their operations. On the other hand, all types of industries are on the Commission's list of waste activities, which began in 2005 and is updated every few years, with new public nuisances, many of which tend to last longer than "immediate elimination" suggests. A leader who works closely with Chinese mining companies told WIRED that although the ban is generally expected to be enforced, miners hope the government will need years to master their operations.

Nevertheless, this decision could lead to significant changes in the exploitation of cryptocurrency, given the weight of China. The largest and most visible miners in the country seem to have felt that regulators are getting closer and have developed plans to expand their operations around the world. This includes Bitmain, the leading Chinese manufacturer of specialized mining chips, called ASIC, which also uses its own hardware to exploit cryptocurrency. Last year, the company announced plans to expand its operations in the United States, with new mining facilities in Washington, Tennessee and Texas. But the price volatility of cryptocurrencies has been a challenge for these projects; In January, Bitmain announced layoffs and suspended plans to open large new facilities in an Alcoa empty cast iron foundry in the small town of Rockdale, Texas. The company then resumed development in March.

Some Bitcoin observers, such as Ben Kaiser, a Princeton researcher who has investigated threats to the influence of Chinese miners on the network, say a Chinese mining ban could be healthy for bitcoin in the long run. Starting in 2013, cities like China's Sichuan Province have become the mecca for large-scale mining, helped by low electricity costs and easy access to the latest ASICs, almost exclusively made in China. The closure of these large facilities, which benefit from economies of scale, could help small-scale miners to compete, both in China, where small-scale operations would likely continue to operate under radar. , and elsewhere.

A big problem for chip makers like Bitmain could be the loss of reliable buyers in China for its chips. Bitmain has recently focused on other uses of its products, such as AI, but remains heavily dependent on cryptocurrency miners for its income. Kaiser notes that this could also help even on the ground, as Chinese companies are the leading manufacturers of mining chips. "The distinction between use and production reduces conflicts of interest and pressure on ASIC manufacturers," writes Kaiser in an email. Bitmain has not responded to a request for comment.

Even outside of China, mining companies are not immune from regulation, especially as local governments are increasingly aware of the impacts of the facilities. In the Pacific Northwest, where miners have banded together to take advantage of cheap hydroelectric power, mine owners have recently been surprised by sharp increases in electricity rates; Last week, Missoula, Montana, adopted a renewable energy requirement for new mining operations, reversing plans for new mining in the county.

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