Is China banning Bitcoin mining a positive?
Last week, news emerged that China plans to ban Bitcoin mining. This sent shockwaves in the crypto world. In this blog, we’ll look at what China is planning for Bitcoin mining. What does this generation of the largest cryptocurrency?
Big news from a big man
The Financial Stability and Development Committee (FSDC), the financial regulatory authority of China in a Friday, May 21 2021 meeting said it plans to crack down on mining within the country. This was taken more seriously than previous reports from China was because of who heds the FSDC. The FSDC is headed by Liu He, a Vice Premier of China. China has four Vice Premiers who report directly to President Xi Jinping.
Minutes of the meeting suggest the FSDC intends on “cracking down on bitcoin mining and trading activities.” This is to ‘prevent financial risks,’ during high volatility. However, there are no crackdowns on miners or halting any activity yet.
These are suggestions, in the form of directives. They are not restrictions on financial transactions for crypto companies. A report from The Block read,
“The comments made in the meeting don’t constitute a formal ordinance or regulation.”
China wants carbon neutrality
This indicates that there is no substance to China banning mining yet. But let’s look at another case, will China ban Bitcoin?
In his address to the United Nations General Assembly (UNAGA) last year, Xi Jinping said China will be carbon neutral before 2060. This would involve cracking down on Chinese Bitcoin miners who are overwhelmingly coal-dependent.
Regions in China that have a cluster of miners like Sichuan, Xinjiang, and Inner Mongolia are already seeing crackdowns. Mining is already banned in Inner Mongolia. These provincial governments have taken steps to push out miners. The regions remove any electricity perks given to them and even set up citizen spies to report on mining farms.
Bitcoin network’s safety improves
China’s crackdown on Bitcoin miners is to preserve energy. The country intends to prevent the use of non-renewable coal-based energy. This crackdown will only help Bitcoin’s global hashrate (the amount of computational power exerted by proof-of-work blockchains). As China cracks down on Bitcoin miners, the Chinese hashrate (50-60% of the global hashrate) will leave China. This will decrease China’s potential ability to influence the Bitcoin markets. This is an overall positive for the cryptocurrency’s network’s security.
In conclusion, China’s crackdown on Bitcoin mining has been a long time coming. But this is nothing new. China has always been on course to restrict or decrease mining to preserve energy. This restriction will help Bitcoin become more secure in the future. China banning Bitcoin mining is a positive.