China’s National Development and Reform Commission (DNRC) has suggested that the country should remove Bitcoin mining from its financial sector. The mining industry is one of over 450 candidates in line for termination.
The agency issues a document (called the Catalog for Guiding Industry Restructuring) listing industries it considers either a waste or benefit to the state. It also proposes plans on how to either encourage or eliminate industry development. An industry could be marked for elimination if it’s inefficient, wasteful, or an environmental hazard.
Environmental Issues Regarding Bitcoin Mining
Crypto mining consumes more energy every year than over a hundred countries do in the same amount of time. Though the efficiency of mining is debatable, that kind of power consumption is certainly considerable.
Environmental concerns have been raised in regard to crypto mining, due to the enormous amounts of energy required to maintain it. For example, Nature, the scientific journal, posted in 2018 that mining might increase global warming by 2°C.
The veracity of this claim came under harsh criticism from various publications, however. These mainly revolve around the sources and methodology used in Nature’s study. Currently, Bitcoin miners are pushing for using alternative, renewable energy sources, such as solar power.
Companies to Feel Most of the Ban
China’s Bitcoin ban does not specify a date by which the government should dispose of mining. Rather, it states that the country ought to eliminate mining operations as soon as possible. This shows a sense of urgency DNRC officials feel towards the issue.
China is one of the largest mining networks, handling about a quarter of all computational power. Therefore, should China enforce the ban, the Bitcoin mining market risks taking a major financial hit.
A large number of companies in China have relied on cryptocurrency for their growth. These mostly include companies that manufacture and distribute hardware equipment dedicated to mining. The ban has the potential to upturn these businesses with disastrous results.
Bitmain would be the most obvious victim of the ban. Bitmain claims ownership of Antpool, one of the largest pools in existence, so it would also suffer a devastating blow from that end. Having in mind its recent struggles with the market, DNRC’s proposal might be the straw that breaks this camel’s back.
Does this Ban Spell the End for Bitcoin in China?
The Catalog for Guiding Industry Restructuring holds significant sway on China’s policy decisions. However, the Chinese government is under no obligation to accept or enforce the propositions set forth by the DNRC. It serves more as a guideline for which industries need to grow or cease operations. In fact, some points as old as the version in 2006 were still present in the 2019 edition.
In addition, the list is still subject to change before the final version is put forward. After May 7th, the proposal will undergo criticism and feedback from the public, so stances regarding Bitcoin may change in the finalized form of the catalog.
According to Reuters, the move to stifle mining operations does not come as a surprise. The idea behind the ban is to revamp the entire industry and assume greater control over it. Being the main mining contributor, China stands to greatly boost its earnings by regulating this sector.
China’s Recent History with Crypto and Blockchain
This attempt to take the reins of crypto mining in its territory isn’t the first of its kind. In 2017, China issued a ban on Initial Coin Offerings due to concerns over fraud risks. Furthermore, in 2018 the state has planned to place a limit on how much power some miners can use.
While Bitcoin and other cryptos are facing scrutiny, the Chinese government seems to be encouraging blockchain technology. It has the most blockchain-related patents, and predictions point to it becoming a blockchain superpower by 2023.
On the same note, China’s Cyberspace Administration has given the go-ahead to various companies, including Alibaba, Tencent, and Baidu, using blockchain technology. As many as 197 companies are expected to embrace blockchain. This shows a clear push to implement blockchain technology across the country’s infrastructure.
Whether this proposed ban on crypto mining will have a serious impact on China’s crypto operations remains to be seen. While it doesn’t have to be legally enforced, the document does reflect the country’s cautious attitude towards mining. Given how dominant China is on this market, such a massive disruption would severely damage Bitcoin mining as a whole.