Since April the media has been talking about China banning mining. This is because of a draft proposal from China’s economic planning commission, which labels bitcoin mining as an industry that needs to be “eliminated”. It’s not surprising that China’s policy catches so much attention. Three quarters of all crypto mining facilities are in China, any government regulations will greatly impact the global mining industry.
Moreover, China’s previous ban on ICOs and cryptocurrency exchanges have affected the crypto market and business operations. On 7th April, China’s top macroeconomic planning agency–the National Development and Reform Commission (NDRC), published a proposed revision that suggests a list of industry activities to be encouraged, restricted and discontinued by the agency. Cryptocurrency mining is listed, alongside 450 other activities, and labelled as an undesirable industry that needs to be eliminated.
Most media has therefore come to the conclusion that China wants to ban cryptocurrency mining, which is very misleading. The latest (2019) final version of Guiding Industrial Restructure Catalog is yet to be released, following the public consultation which concluded on 15th of May. If the final policy still includes virtual currency mining in the “undesirable” category, mining is unlikely to “disappear” in this country. One should understand that NDRC’s policy is to guide local government on how to allocate their investment & resources to balance economic growth with overall stability. The policy guide is not a legal basis for taking forceful actions to shut down companies.
The local government must order a business to stop production or close its business in accordance to relevant laws such as environment laws and land-use laws. For industries that are categorized as ‘to be eliminated’, the local government is prohibited from investing in these projects. “All financial institutions shall stop various forms of credit granting supports to these projects, and take measures to recover the granted loans” (State Council’s ptomulgstion, 2005).
Obviously, local governments are 1 required to take proper actions to implement what’s outlined in the NDRC’s policy guide, but their actual actions are decided by the relevant laws and regulations of the state. It is currently unclear what law cryptocurrency mining should fall under.
The most associated one may be about environment. Bitcoin and other PoW cryptos are often criticized for their electricity consumption and carbon emissions.
Based on the Bitcoin energy consumption index provided by http://digiconomist.net, the current electricity consumption of Bitcoin mining is about 42.15~54.11 TWh (TWh, 1 TWh is 100 million kWh). It ranks at 52nd in the world’s energy-consuming countries, second only to Uzbekistan’s 51.3 TWh (51st), roughly equivalent to 80.5% of Czech energy consumption.
Taking consideration of 70% mining operated in China, around 30 TWh electricity is consumed within the country.
The figure accounts for about 1% of China’s electricity consumption. People within the industry argue that mining actually helps consume excess electricity, creates jobs and brings money to the region.
Chinese mining farms generally locate in Inner Mongolia, Xinjiang and South Western provinces like Sichuan and Yunnan, where there’s an oversupply of electricity generated every year. This electricity can neither be fully consumed by local demand nor be integrated to the State Grid to be transmitted to regions outside. It will be wasted if not be utilized.
Will local governments in these areas consider their own interests when implementing the industrial policy? Maybe the Chinese government will still ban mining from different levels, just like what they did with the Internet, ICOs and exchanges, to rebuild the crypto industry into one that they have full control over. By then, it won’t be surprising if mining farms immigrate to other countries.
Anyway, let’s wait for the official policy announcement first.
Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.
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