China deals a two-pronged blow to cryptocurrencies

Cambodia Compass report, 20th May - The crackdown is aimed at digital miners, who used more energy than Argentina in 2019.

This week, the cryptocurrency universe received two doses of bad news, as authorities in the world's largest bitcoin mining nation stepped up their crackdown on the digital asset.

On Tuesday, the Inner Mongolian Autonomous Region declared that it had set up a website for citizens to report illegal ventures, as part of a drive to root out cryptocurrency mining in order to reduce carbon emissions. On the same day, three financial self-regulatory organizations released a joint notice prohibiting financial institutions and payment firms from offering cryptocurrency services to consumers, including accepting the currency as payment, directly or indirectly. After police in Anhui Province busted a digital currency pyramid scheme involving 2,000 people and more than 200 million yuan ($31 million), they cautioned about the dangers of speculating in cryptocurrencies and advised people to be cautious of scams.

China has long held a negative view of cryptocurrencies, citing concerns about the risks that a rise in speculation might pose to the country's financial system. Financial regulators prohibited financial and payment institutions from engaging in bitcoin-related business, including accepting bitcoin as payment, in 2014. The People's Bank of China (PBoC) barred initial coin offerings in September, and a PBoC-affiliated newspaper reported in February 2018 that the central bank would restrict access to domestic and international cryptocurrency exchanges.

While the government is concerned about speculation, it is also concerned about the effect of cryptocurrency mining on energy usage and the climate. According to the Center for Alternative Finance, or CAF, at the University of Cambridge in the United Kingdom, China dominates the global bitcoin mining network, which generated more energy on an annualized basis in 2019 than Argentina.

According to a report published last month by researchers in China, the United States, and the United Kingdom, China's bitcoin mining energy consumption will exceed the overall energy consumption of countries like Italy in 2024, and carbon emissions will exceed the annual greenhouse gas emissions of Spain and the Netherlands.

China is the world's largest user of computing resources for bitcoin mining, the most common cryptocurrency. According to data collected by the CAF, it accounted for an estimated 65 percent of the overall global bitcoin hash rate from September 2019 to April 2020. Inner Mongolia, a coal-producing region in northern China with massive power generation capacity, was China's third-largest bitcoin mining region, accounting for an estimated 8.1 percent of the global hash rate, which is a measure of the bitcoin network's computing power as measured by the number of calculations per second.

People are being encouraged to submit information about any company or activity involved in cryptocurrency mining, such as companies posing as data centers to take advantage of preferential tax, land, and electricity policies, businesses that provide services to mines, and companies that obtain electricity illegally for the purposes of cryptocurrency mining.

The step follows a pledge from the local government in February to shut down all digital currency mining ventures in the area by the end of April to help achieve a goal of reducing energy consumption per unit of GDP by 3% this year.

The closures were part of a slew of steps in the document aimed at ensuring the area meets the energy intensity targets outlined in its 14th Five-Year Plan, which will direct its growth through 2025. The paper also prohibits the establishment of new cryptocurrency mining operations.

According to a local official, the monitoring platform is targeting all cryptocurrency mining ventures, not only those that use coal power.

Concerns about the energy intensity of cryptocurrency mining have spread around the world. Elon Musk, the founder of electric vehicle manufacturer Tesla Inc., changed course last week after openly endorsing bitcoin and claiming it would be accepted as payment for car purchases. Tesla had halted bitcoin purchases due to concerns regarding the use of fossil fuels for bitcoin mining and transactions, he tweeted. Bitcoin values plummeted as a result of his U-turn.

The news of China's financial regulators' crackdown on Tuesday sent cryptocurrency prices even lower, with bitcoin trading at around $39,000 on Wednesday, down from around $43,000 on Tuesday and around $63,000 in mid-April.

Source: Cambodia Compass comprehensive arrangement

Editor: Malinda         Chief Editor: Sunnie         General in Chief/Executive Producer: Nicole

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