Bitcoin: China cracks down on mining cybercurrency amid fears of electricity use and risks | City & Business | Finance

A multi-agency task force has instructed provincial Governments to “actively guide” companies to leave the cryptocurrency mining industry, according to a document.

Chinese miners are now seeking ways to transfer their operations abroad either by physically moving their factories or by selling their expertise.

China mines around three-quarters of the world’s bitcoins, according to Liao Xiang, chief executive of Shenzhen-based mining operation Lightningasic – but China is not a particularly suitable location for mining.

Mr Liao said: “The difficulty is that setting up in other countries takes time and capital to build large-scale data centres.

“It needs so much electricity. A typical industrial park doesn’t meet the requirements.”

China’s dominance is mainly due to its well-developed supply chains for computer components used in the mining process, even after accounting for electricity costs in selected regions that are lower than the average.

The most promising destinations for mining bitcoin are Canada, Iceland, eastern Europe and Russia.

Mining bitcoin accounts for 0.17 per cent of global electricity consumption which is more than 161 individual countries, according to Digiconomist, a website that tracks the industry.

According to the document seen by the FT: “Bitcoin mining consumes a large amount of electricity and also encourages a spirit of speculation in ‘virtual currencies.’”

Bitcoin is “mined” by solving complex maths problems whose solutions are used to validate new bitcoin transactions.

Although it is a computational process, the use of power makes it more like industrial manufacturing than traditional high-technology business.

A lot of miners established operations in remote areas without a registered company.

Some avoided Chinese regulations that forbid users from purchasing electricity directly from power producers rather than grid operators.

Miners take advantage of cheap electricity in regions rich in coal or hydroelectric power, including Xinjiang, Inner Mongolia, Sichuan and Yunnan.

The document added that mining operations contradict efforts to prevent financial risk to discourage activities that “deviate from the needs of the real economy”.

China’s Government is using state investment and a plethora of industrial policies in an effort to lead global strategic technology such as artificial intelligence and robotics.

But, the crackdown on cybercurrency means the state does not think it warrants support.

The internet finance task force led by the People’s Bank of China has led regulatory tightening efforts on peer-to-peer lending and online consumer loans.

It does not call on regional authorities to shut down mining operations directly, but instead to squeeze them out through strict policies on electricity consumption, land use, tax collection and environmental regulation.

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