China is considering cracking down on Bitcoin mining, in the country’s latest attempt to separate its citizens from their beloved virtual currency.
Back in 2013, when bitcoin was hitting its peak of around $1,200, China stepped in and ‘banned’ it. The impact was an immediate plunge in price, which briefly recovered in November’s double top, before the long bear market of 2014 (helped by the fall of MtGox).
China has always had a habit of banning bitcoin, before backtracking – prompting the crypto world to suggest that officials just want to load up on cheap coins. There have been numerous points over the last five years when the People’s Bank of China (PBoC) has taken action to curtail bitcoin trading, generally by attacking exchanges themselves rather than their customers – stopping them offering high leverage, preventing financial institutions from working with them, and so on.
Now, it’s mining. The authorities are considering cracking down on Bitcoin and other proof-of-work crypto miners. The given reason is the amount of power these operations consume. China is a popular venue for crypto mining, with over 70% of Bitcoin’s network hashrate, thanks to its cheap power and the country’s willingness to burn its vast reserves of coal for energy. However, it is likely that there is an ulterior motive. Bitcoin offers a form of financial freedom, enabling citizens to shelter money and move it out of the country – something the government has tried to prevent in the past, through capital controls, as it tries to stimulate the economy by devaluing the currency. Mining bitcoin is effectively a way of converting Yuan into BTC, and thereby USD, should the miners wish.
And, with over 70% of network hashrate, that means $7 million a day or around $2.5 billion per year could be leaving the country – a small amount by Chinese standards, but enough to set a threatening precedent for PBoC.
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