Unsettling news comes from China for crypto miners: the country considers making mining farms illegal. This information made headlines last week, after an update published by the National Development and Reform Commission (NDRC). The NDRC is the top economic planning agency in China. Thus, the recent announcement carries significant weight.
Is China Ready to Kill Off Half of the Bitcoin Mining Farms in the World?
According to the South China Morning Post, NDRC stated that crypto mining uses too many natural resources and generates pollution. However, most of the mining farms currently operating in China run on cheap and clean energy. They use hydropower generated during the rainy season. Actually, this is one of the key reasons why there are so many mining farms in China.
So, how many such farms are there in China? The answer is, around half of the Bitcoin mining network. At the same time, the largest Bitcoin-mining hardware manufacturer in the world is a Chinese company Bitmain.
Reading Between the Lines
However, not everyone is convinced that mining farms will actually be banned in China. In this respect, Reuters cited Jehan Chu, the managing partner of blockchain investment company Kenetic, stating:
I believe China simply wants to ‘reboot’ the crypto industry into one they have oversight on, the same approach they took with the internet.
Indeed, there is no secret that China tries to control everything – from its people (police officers are currently equipped with face recognition glasses) to technology. In fact, Bitcoin critics have drawn attention for some time now to the high concentration of mining farms in China. The Communist state’s dominant position in the crypto world may have a centralising effect in the long run.
What Happens After China Enacts the Ban?
Thus, even if China does outlaw mining farms, it would not be such a bad thing for the blockchain world, after all. As Michael Zhong, an analyst at TokenInsight from Beijing, told South China Morning Post:
Bitcoin mining will no longer be dominated by China but become more decentralised.
Also, there are precedents that make the NDRC threat to mining farms quite real. In September 2017, China outlawed cryptocurrency exchanges that served local clients. After this decision, Bitcoin prices dropped significantly. There is no telling the effect of shutting down half of the mining farms.
At the moment, the NDRC proposal is under public debate, and will be until the 7th of May. Thus, we only have to wait one month until we can know for sure whether miners can continue using the crypto farms in China or need to look for other regions.