After successfully banning ICOs and then all cryptocurrency exchanges within the country’s borders, the eyes of the Chinese authorities are now on the Bitcoin mining industry.
According to a local source, the People’s Bank of China (PBC), the Chinese central bank, is pushing for the regulation of the power usage of Bitcoin miners, thus reducing the scale of their coin production.
As the bank does not have the authority to impose such rules, it has told the Leading Group of Beijing Internet Financial Risks Remediation, in a closed-door meeting at the end of 2017, to ask local authorities to impose limitations on power usage, as per the source.
The unnamed source explained that the authorities are concerned that bitcoins mined using local resources do not contribute to the mainstream economy, as most of them are sent to foreign countries.
EuropeFX Partners with Acuity for AI-Powered News Sentiment AnalysisGo to article >>
If the proposed regulations on power usage are implemented, only small miners will be affected for now. According to the current non-compliance rules, the impact on large mining operations will be very small.
The high-performance GPUs used in Bitcoin mining require a lot of electricity. These rigs need to constantly solve complex cryptographic problems to verify each Bitcoin transaction. The rewards associated with the creation of new blocks also encourages miners to use chips with high processing power in order to achieve an advantage in the rat race of block creation.
According to a recent report, the Bitcoin mining industry is using more power than 159 separate countries, and increasing mining activity has led to blackouts in many third-world countries.
The Bitcoin mining industry is very concentrated, with almost half of the mining rigs located in China. Though China’s low electricity costs attract miners to the country, most of China’s energy needs are catered to by coal-fired power plants. This means that there is a huge carbon footprint for each Bitcoin transaction.
After the ban on cryptocurrency exchanges by the Chinese government in September, the crypto economy took a huge blow. China was recording the highest Bitcoin trading volume all over the world, and that vanished overnight.
The impacted exchanges are now taking refuge in neighboring crypto-friendly Asian countries, and many have partnered with local businesses to open exchanges in their new homes. For example, Huobi, formerly the biggest crypto exchange in China, has partnered with Japanese SBI Group and will open two new exchanges this month.