Bitcoin mining encounters strong regulation, miners say everyone is waiting and watching, expecting more rules

Mining to overseas development has been the industry consensus, before the tendency to ultra-low electricity prices in the region, but in Iran and other places encountered policy risks, the recent main flow to the policy and energy are more stable in North America.

Bitcoin mining encounters strong regulation, miners say everyone is waiting and watching, expecting more rules

On May 21, Vice Premier Liu He presided over the fifty-first meeting of the State Council Financial Stability Development Committee to study and deploy the next phase of key work in the financial sector. The meeting emphasized cracking down on bitcoin mining and trading practices and resolutely preventing the transmission of individual risks to the social sector.

As a result of this news, Bitcoin and cryptocurrencies generally plummeted in a waterfall fashion. It is worth noting that this is the first time that the central government has explicitly proposed a “rectification” of bitcoin mining, and the entire “mining circle” instantly exploded, with Bitcoin Mining Pool (B.TOP) and Firecoin Mining Mall making statements to stop providing services for customers in mainland China. The whole “mining circle” instantly exploded.

Several industry insiders analyzed to the KRC Daily that under the tightening regulation, large mining farms and pools will be hit the hardest; it is possible that a large number of miners and computing power will be transferred overseas like the introduction of the “94” document in 2017.

However, many miners told reporters that it is too early to talk about “going overseas”, after all, the meeting has just been held, and most miners are still in a wait-and-see state, looking forward to more detailed policies.

Shut down mainland services one after another

Yesterday, a screenshot of a chat with “Firecoin Mall’s small customer service” circulated online, saying that in line with China’s latest industry regulatory policies, the mall decided to suspend the provision of mining machines and derivative services for users in mainland China; for those who have purchased BTC mining products (including “mining machines + hosting The company has suspended the provision of mining machine hosting services for users who have purchased BTC mining machine products (including “mining machine + hosting”, “one-stop” and “worry-free mining”), and the machines will be taken off the shelves from today (23rd).

The KCI Daily reporter confirmed from multiple independent sources that this rumor is true. For its part, FireCoin responded that since this year, the pace of globalization of the mining mall business has been increasing, and in order to focus on expanding overseas business, the mining mall has decided to suspend the provision of related services for users in mainland China. The solution to the mining machines held by old users will be notified to customers later.

In the early morning of May 22, Jiang Zhuoer, the founder of Lebit Mining Pool (B.TOP), issued a statement on social media, deciding to stop providing mining machine proxy services for customers in mainland China.

In response, Jiang Zhuoer said that the new policy of the Financial Stability Development Commission of the State Council will have the most obvious impact on large mining farms, but he judged that bitcoin mining will continue, except that the main body of Chinese mining has changed from large-scale mining farms to family miners, small and medium-sized miners.

On the same day as the Lebit mining pool, the person in charge of Mint Mining also announced to the public that it has laid out Canada and Kazakhstan.

“Dirty Currency”

“Mining” is the jargon of the Bitcoin world, specifically refers to the use of the chip’s computing power to constantly “hash collisions” in the blocks (blocks) generated by the Bitcoin system, to win the right to keep track of the accounts and thus obtain the system’s reward of Bitcoins. This tedious and repetitive process is known as “mining” in the Bitcoin industry.

The biggest expense of the “mining” process is the initial investment in the mining machine and the amount of electricity used to run the machine on a daily basis. In order to reduce production costs, most bitcoin mining sites “live with electricity”.

With the global trend towards carbon neutrality, Bitcoin’s energy consumption has been pushed to the forefront. So how energy-intensive is bitcoin?

Recently, the Financial Times published a feature article entitled “Dirty Money: The Growing Problem of Bitcoin’s Energy Consumption”. As mentioned in the article, the latest calculations from the University of Cambridge’s Bitcoin Electricity Consumption index seem to indicate that bitcoin mining uses 133.68 terawatt-hours of electricity per year – an estimate based on best guesses that has been rising over the past five years. years. This puts Bitcoin’s electricity consumption slightly higher than Sweden (131.8 TWh in 2020) and second only to Malaysia (147.21 TWh).

However, the real power consumption figure for Bitcoin could actually be much higher. Higher bitcoin prices will attract new miners, mining with older, less efficient equipment.

And China has the most active bitcoin mining activity in the world. According to data from the Center for the Study of Alternative Finance (CCAF) at the University of Cambridge, China accounts for 65% of global bitcoin mining computing power.

The most important cost of mining is the cost of electricity to run the “mining machines,” so “mining farms” are usually located in areas where electricity is abundant and cheap, such as Xinjiang and Inner Mongolia, which are rich in thermal power, and Yunnan, Sichuan, and Guizhou, which are rich in hydropower. Xinjiang alone accounts for 35% of the country’s bitcoin mining computing power.

On April 6, a paper titled “Policy Assessment of Carbon Emissions and Sustainability of Bitcoin Blockchain Operations in China” was published in Nature Communications, arguing that without any policy intervention, China’s carbon emissions from bitcoin mining would rank in the top 10 of 182 prefectures and 42 major industrial sectors in the country, accounting for about 5.41% of China’s carbon emissions from electricity generation, and the carbon emissions caused by the industry’s GDP per capita would also reach 10.77 kg/$.

“Following the publication of the paper “Policy Assessment of Carbon Emissions and Sustainability of Bitcoin Blockchain Operations in China,” China’s Bitcoin mining industry policy was rapidly tightened.” According to Liu Changyong, director of the Blockchain Research Center at Chongqing Gongshang University, the main regulatory driver in China comes from “carbon emission and carbon neutral” policies.

Miners on the sidelines

“The mining industry has been developing overseas by industry consensus, and previously tended to favor ultra-low electricity price regions, but after encountering policy risks in Iran and other places, the recent flow is mainly to North America where the policy and energy are more stable.” Liu Changyou told Science and Technology Daily.

The vast majority of domestic exchanges were shut down after the “94” document from five ministries and commissions was issued in 2017, and began looking for overseas development opportunities instead. Liu Changyou pointed out that the mining industry has also laid out overseas since 2020, and the recent tightening of regulatory policies will accelerate the transfer of the mining industry to North America.

In fact, as early as January 2018, the Office of the Leading Group for the Special Rectification of Internet Financial Risks issued a document requesting local governments to guide mining enterprises in their jurisdictions and exit in an orderly manner.

In April 2019, the National Development and Reform Commission published the Guidance Catalogue for Industrial Structure Adjustment (Draft for Comments), which classified virtual currency mining as a category that should be eliminated, but the official version released that year removed coin mining from the elimination list.

On May 18 this year, the Inner Mongolia Development and Reform Commission issued an announcement to set up a reporting platform for virtual currency “mining” enterprises to fully accept reports on virtual currency “mining” enterprise issues.

On May 21, the State Council’s Financial Stability Development Committee held a meeting to clearly “crack down on bitcoin mining and trading”.

A mining source, who did not want to be named, analyzed to the “Science and Technology Board Daily” reporter that if this policy is implemented, small miners will basically go to the cloud computing power, and the domestic estimation will only be left with cloud computing power; while big miners and listed companies, represented by Wu Jihan, Jiang Zhuoer and, will go to sea.

“The state is actively guiding the mining industry, has been working hard to effectively use the mining industry, the financial committee of this policy actually for the sake of financial stability and protection of investors’ interests to start.” The person to said, “Now are waiting for the specific regulatory landing, if the policy ‘one size fits all’, many of the mines actually turned underground, it will be even more impossible to protect investors.”

Multiple miners and related people told KICB Daily that miners are generally still in a wait-and-see state to wait for more policy news; after all, no detailed documents have been seen yet.

Liu Changyong, director of the Blockchain Research Center at Chongqing Business University, on the other hand, stressed that the policy tightening is national, with Inner Mongolia taking a step ahead and Sichuan’s recent policy tightening; overall, the outlook for domestic mining development is worrisome without significant policy changes.

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