China Looks To Phase Out Bitcoin Mining

China’s central government has labelled cryptocurrency mining as an undesireable sector that should be eliminated, according to a draft list published this week.

The list is China’s latest move to downplay the sector, which nevertheless thrives in the country, with China being the world’s largest market for currency-mining hardware.

The National Development and Reform Commission (NDRC) published the list this week as a proposed revision to the Catalog for Guiding Industry Restructuring, which lays out industrial activities the agency recommends should be encouraged, restricted or discontinued.

In the latest revision, the NDRC lists coin mining amongst the more than 450 undesireable activities that should be discontinued, along with others that are obsolete, result in low productivity or cause heavy pollution.

Clampdown

No date is given for phasing out coin mining, indicating it should be discontinued immediately.

The list, an advisory to local governments as to which sectors were to be encouraged and which were not, was last revised in 2016.

The government launched a public consultation on the draft list on Monday, which extends until 7 May.

China made its first moves to clamp down on cryptocurrency activities in 2017, banning initial coin offerings and shutting coin exchanges.

The country also began placing checks on coin mining, causing a number of mining firms, some of which are amongst the world’s largest, to relocate out of China.

China is also the base of some of the world’s biggest manufacturers of specialised coin mining servers, three of which filed for public offerings in Hong Kong last year.

But two of them, Bitmain Technologies, the world’s biggest coin mining equipment maker, and Caanan Inc., have now allowed their applications to lapse.

Canaan’s public offering prospectus, filed last year, said sales of cryptocurrency mining hardware in China were worth 8.7 billion yuan (£990m) in 2017, accounting for 45 percent of the firm’s global sales by value, Reuters reported.

China has also brought in stricter regulations on information services that use the blockchain, the technology that underlies Bitcoin.

Energy drain

Bitcoin and other cryptocurrencies are created through a resource-intensive computational process known as “mining”.

The procedure involves a significant power draw, causing some mining operations to locate themselves in areas with inexpensive power, such as Iceland, which said in February 2018 that crypto-mining operations had for the first time drawn more power than Iceland’s 348,000 residents used to power their homes.

Bitcoin’s value slumped by about 74 percent last year, amidst fears of a government clampdown on the largely unregulated cryptocurrency, after soaring more than 1,400 percent in 2017 to finish the year at nearly $20,000 (£15,290).

Last week the asset jumped over $5,000 for the first time since November 2018, although industry watchers remained puzzled over why the surge occurred.