The death knell for Chinese crypto miners?Drilling rigs are moving after government crackdown

When it comes to China, almost nothing is clear, and The country recently cracked down on cryptocurrency mining not excluded. The Financial Stability and Development Committee of the State Council reported on May 21 that Bitcoin is being cut (Bitcoin) Mining amid financial risk concerns, which prompted the South China Morning Post Announce “China’s position in the global Bitcoin mining center is weakening.”

“We see the cryptocurrency market entering the path of’de-sinicization’-first trading, and now computing power. This is based on a series of stronger measures taken by Beijing on cryptocurrency and Bitcoin mining last week. “Wang Juan, associate professor of Blockchain at Xi’an Jiaotong University and member of the OECD Blockchain Expert Policy Advisory Committee, told the publication.

But maybe not. Darin Feinstein, the founder and executive chairman of Blockcap, one of the largest crypto miners in North America, is not entirely convinced that Bitcoin mining is done in China, the world’s current mining center. He told Cointelegraph that in 2017, China issued a similar statement and further explained:

“After announcing this news, another company I founded, Core Scientific, signed multiple contracts with Chinese miners to help them move some of the miners back to the United States. None of these transactions came to fruition. To this day, all these miners are still working. China’s mining.”

still, Three mining companies — BTC.TOP, Huobi and HashCow — announced them Closing a store in the mainland, And China expert Bill Bishop Report In his newsletter “Chinese Doctrine”, the eight draft measures taken by the government on mining activities in the Inner Mongolia area are “stern”. “It is even harder to think that this is just a temporary suppression. Things will go back to the past and normal soon. Now.” Other provinces and regions, including Sichuan and Xinjiang, may follow suit.

As Feinstein pointed out, no one can be sure what is happening behind the scenes in China, but it is worth asking: What is the real driving force behind the latest (obvious) crypto mining ban, and why now?

Is it purely to avoid financial risks announced by the state, or may it involve other aspects, including energy/environmental issues? Will Chinese mining companies move overseas now, and if so, where might new crypto mining centers appear?

Finally, this is another signal that the energy-intensive proof-of-work verification protocols used by Bitcoin and other cryptocurrencies are becoming more and more problematic in an ecologically anxious world?

Threat to the “old system”?

Luxor Tech Chief Operating Officer Ethan Vera told Cointelegraph when talking about the new mining restrictions, “For the central government, the control of monetary policy and the financial system is very important, and Bitcoin poses a threat to this,” he added, “ Bitcoin is clearly consolidating its position in the world and proving itself to be a valuable store of value for the people of the world. This threatens the old system.”

Yu Xiong, associate dean of international affairs at the University of Surrey and head of the Department of Business Analysis at Surrey Business School, listed environmental issues as the primary cause of the crackdown. Countries like China that have announced their desire to be “carbon neutral” at some point—in the case of China, 2060—are now feeling increasing pressure to “away from emission-intensive industries”. Xiong told Cointelegraph that Bitcoin mining is an industry that can be easily sacrificed, “without much cost at the national level.”

Why now? “Bitcoin has grown too fast recently, affecting the behavior of many investors,” Xiong said. “The government usually wants to see an industry grow reasonably rather than radically-so some action must be taken.”

However, in Xiong’s view, this may not necessarily be the end of the mainland’s mining industry. This industry may become a regulated industry in the future. In economic terms, “They have already made money in this round, so now they cash out, wait for the price to fall, and then join again,” he said.

“It’s too early to judge the actual impact of the Deputy Prime Minister’s remarks,” Vera said, adding, “This week we have seen hundreds of megawatts of electricity demand at our desks.” He further explained. :

“Miners in Inner Mongolia and Xinjiang have already contacted international suppliers to try to take out their mining equipment immediately. Some miners in Sichuan have begun to seek to transfer part of their business overseas to diversify geopolitical risks.”

Are environmental issues effective?

Vera stated that ecological concerns about the energy use and carbon footprint of encrypted mining may be a “scapegoat,” while Feinstein believes that environmental issues have some nuances. For example, in the Sichuan region, “most of the electricity is renewable energy, coming from a large number of hydroelectric power plants that run renewable energy. These plants have a lot of excess energy during the rainy season in China”, and the cost of electricity is close to zero.

However, elsewhere, China uses a lot of coal, Feinstein continued. “I think coal regions will face pressure to close in order to achieve their internal climate goals,” while miners located in the prevalence of renewable energy may face fewer restrictions. “But we haven’t seen a comprehensive document, so this is pure speculation at the moment.”

Ma Winston, Adjunct Professor, New York University School of Law, author Digital Warfare: How China’s Technological Power Shapes the Future of Artificial Intelligence, Blockchain and Cyberspace, Told Cointelegraph that environmental issues are indeed an important factor in the crackdown, although hydropower-such as those used in Sichuan-is considered clean energy, “The Chinese government has committed to achieving energy efficiency goals, which may still limit high energy consumption such as encrypted mining. The expansion of the industry,” added:

“Yes, carbon neutrality is a major consideration. […] Recent studies by Chinese scientists point out that China’s emissions output [from crypto mining] Will exceed the total annual greenhouse gas emissions of some smaller countries such as the Czech Republic and Qatar. “

However, Feinstein disputes the carbon footprint and energy consumption arguments-insisting that they lack context. “The total energy produced in the world is 160,000 terawatts per hour. This is all energy from every source. The Bitcoin network uses 120 TWh of energy. In short, this means that the Bitcoin network uses 0.00075 of the world Of available energy, “or less than one-tenth of 1%.

Similarly, the carbon released by “the energy used to connect machines to the grid” is also less than 0.1%, and this number has dropped sharply as more and more mining machines switch to renewable energy. Feinstein added:

“Some industries are criminally responsible for destroying our environment and ecosystem, but this is not one of them.”

Can North America make up for the shortcomings?

If China does curb cryptocurrency mining, will North America replace it as the regional center of mining—as some people have even implied before the new restrictions are introduced? Who else can profit?

according to To the Cambridge Alternative Finance Center, Bitcoin currently consumes about 110 terawatts per hour per year, while Ethereum has increased by 44.5 — according to For Digiconomist-this does not even include other PoW cryptocurrencies, so if a large part of them are closed in China, it will have to find a new home. Vera said:

“North America is ready to take on most of its electricity demand in the medium term, but it cannot take it all immediately. We expect significant growth in South America and the Commonwealth of Independent States region [e.g., Kazakhstan]And Northern Europe. “

“If Chinese miners are nervous about future policies, they will slow down the purchase of new equipment,” Feinstein said. “These equipment buyers will turn to sub-optimal customers. I believe these customers are in the United States. Therefore, we should see U.S. mining companies increase the hash rate.”

But there are potential obstacles here, including the lack of infrastructure companies to provide the power needed to power the computers that verify encrypted block transactions. “In terms of plugging in these machines, you need to have […] The company builds sufficient infrastructure at a speed that can accommodate these miners. Currently, the demand for plug-in miners exceeds the available infrastructure,” Feinstein said.

related: North American crypto miners prepare to challenge China’s dominance, Cointelegraph Magazine

“Kazakhstan and Canada are areas where Chinese miners have recently talked about possible relocation,” Ma added. But relocation may not be as simple as it sounds. “Chinese miners may have to deal with unfamiliar partners, unstable power supply and unexpected new compliance costs. Coupled with relocation costs, only the largest and most resourceful mining operators may be able to relocate smoothly.”

It is worth noting that all large Bitcoin ASIC manufacturers are located in China, Thomas Heller, co-founder and chief commercial officer of Bitcoin mining service provider Compass Mining, told Cointelegraph. Bitmain, MicroBT, and Canaan are the only three companies that have a new generation of Bitcoin ASICs. Heller further stated:

“If the Chinese government cracks down on ASIC manufacturers, it will have a huge impact on the mining industry. Currently, Bitmain has factories in Malaysia, and Bit Micro is also exploring setting up factories in Southeast Asia. I look forward to these companies increasing their efforts overseas.”

In other places, “Because of lower electricity prices, Russia and Kazakhstan are more inclined to transfer a large number of older generation mining machines,” Heller added, “and North America is more suitable for new generation mining machines. The current challenge in North America is to host miners’ machines. There is a serious shortage of rack space.”

In the long run, what do all these debates say about Bitcoin and other cryptocurrencies that use energy-consuming verification protocols? In the long run, is this a sustainable industry? “Although we don’t think China’s repression is related to the environment, we do think it is an urgent issue in North America,” Vera replied, adding further:

“Western miners entering the capital market for expansion must promote renewable energy or carbon-neutral mining methods to attract capital. Publicly listed mining companies are the first companies to receive attention and must respond, as we have seen Of Greenidge purchased carbon offsets and Marathon switched from their Hardin site to Compute North.”

Xiong told Cointelegraph that Bitcoin can continue to grow, especially if all its mining pools switch to renewable energy. In fact, the industry has the opportunity to become a shining example for other industries-that is, “the first industry to achieve zero carbon.”

Elsewhere, bear wrote “Regulations and rules should be formulated as soon as possible to regulate the mining behavior of Bitcoin, and clearly require that only renewable energy such as solar and hydrogen energy be used for cryptocurrency mining.”

Does China have a long-term role?

All in all, do the recent events mark the end of China’s cryptocurrency mining dominance-estimated to be as high as 80% The capacity of the world-although some people think it is lower?

BTC.TOP founder Jiang Zhuoer wrote in a blog post: “In the long run, as Chinese regulators crack down on domestic mining, almost all of China’s crypto mining machines will be sold overseas.” Report Reuters reported. “China will lose its encrypted computing power to foreign markets,” including mining pools in Europe and the United States.

related: As investors seek greener cryptocurrencies, carbon neutral bitcoin funds gain attention

Recalling the similar mining ban announced by China in 2017, Feinstein told Cointelegraph: “I expect similar results this time. These miners will start mining in 2024, and we can expect another similar announcement by then. We will I saw that certain countries will always ban Bitcoin and mining. If a country is likely to completely ban Bitcoin or Bitcoin mining, it will only happen once.”

But maybe the paradigm has really changed. “We still believe that China will play a role in the mining industry in the long run,” Vera said. “But this incident has fundamentally changed the way Chinese miners view domestic risks and will encourage international expansion.”