Friday June 25th 2021
Beijing pulls the plug
Crypto miners are turning their backs on China
By Diana Dittmer
China is fighting against Bitcoin and Co. with ever tougher bandages. Miners have to shut down their computers. Quite a few pack up and run away. Is the former crypto stronghold China coming to an end? A new crypto hub is emerging where you would not initially expect it.
The government in China seems to want to put an end to the crypto scene for good. The Middle Kingdom used to be something like the hub of the crypto world. Two thirds of all new bitcoins were mined in the country. But that was once upon a time. China’s mining scene is on the decline because of the country’s rigorous anti-crypto policy. “The exodus is imminent,” a Bitcoin prospector from the southwestern province of Sichuan said this week to the “Global Times”. “We’re fleeing overseas.”
China has never made a secret of the fact that their Bitcoin and Co do not fit. As the government made clear this week, however, it is ready to fight with increasingly tougher conditions. At the beginning of the week, the authorities pulled the plug on 26 mines in the Chinese Bitcoin stronghold. The systems were shut down. Crypto farms had also been closed in the weeks before. The price of the oldest and still most important cryptocurrency Bitcoin plummeted. Last Tuesday, the price fell below $ 30,000.
With its prospecting ban, the government made an unequivocal signal: It now wants to make short work of it. Digital currencies such as Bitcoin or Ether are no longer being let up. Bitcoin has always been regulated in China, but crackdowns are now taking place. According to the Chinese authorities, cryptocurrencies disrupt the economic order and facilitate illegal asset transfers and money laundering. In addition, the mining harms the environment and the other industry is dug up the energy. Observers, however, point out that Beijing is pursuing its own interests and may be more concerned about possible competition with the digital yuan.
90 percent of mining farms offline
Because mining has become almost impossible due to the rigorous regulation, miners are now giving up their business in a row. “If the government doesn’t allow (crypto mining), I just have to stop,” an operator of mining farms in China’s southwestern Yunnan Province told Reuters. According to an estimate by market analysts at OKEx Insights, up to 90 percent of all mining farms in the country could go offline.
The entire crypto market is feeling the effects of the prospecting ban: Most miners in China “shut down their machines and sell them,” said Nishant Sharma, the founder of the consulting firm for the crypto industry, BlocksBridge Consulting, to Reuters. The prices for rigs have collapsed as a result.
“The computers are selling like junk,” says Mike Huang, operator of a crypto mining farm in Sichuan province. Equipment that was worth 4,000 yuan (US $ 620) two months ago is now available for a fifth of that, reports a prospector from the same province. The leading mining hardware producer in China, Bitmain, responded to the Chinese prospecting ban by announcing that it will stop selling its equipment. “This is the end of an era for crypto mining in China,” predicted Winston Ma, professor at NYU Law School.
Kazakhstan: the new crypto hotspot?
The first miners from China have already pitched their tents abroad. Many would ship their equipment and seek refuge in Kazakhstan or Texas, report the heads of the world’s largest cryptocurrency exchanges. “We are seeing how many miners from China are moving to other places,” quoted the US financial agency Bloomberg as quoting the head of the world’s largest crypto exchange at Binance Holdings, Changpeng “CZ” Zhao.
Although politicians in Paraguay and El Salvador advertise their business location, many are more drawn to Kazakhstan. Because here the government decided in June 2020 to bring a law into motion to promote crypto mining. In mid-June, Canaan announced that it had opened a service center in the former Soviet republic for its customers. The mining company BIT-Mining has also started its move from Sichuan to Kazakhstan. The country could develop into a hub for the Chinese mining industry, writes the Bitcoin Kurier portal.
The USA is also a popular destination for Chinese miners. BIT Mining, for example, has also invested in data centers in Texas. Meanwhile, some miners in China still hope that the ban in China will be relaxed. “The power was cut, but we weren’t ordered to demolish the facility,” said Wang Weifeng, a Sichuan miner. “We’ll wait and see. There remains a glimmer of hope.”