How to understand the recent regulatory policy – Take the introduction of “eight measures to combat mining” in Inner Mongolia as an example

How should I interpret the documents issued by the Inner Mongolia Autonomous Region that involve virtual currency mining?

How to understand the recent regulatory policy - Take the introduction of "eight measures to combat mining" in Inner Mongolia as an example

Yesterday, the public number of Inner Mongolia Development and Reform Commission issued a notice on the “Eight Measures of the Development and Reform Commission of Inner Mongolia Autonomous Region on Resolutely Combating and Punishing Virtual Currency “Mining” (Draft for Comments)” (hereinafter referred to as the “Eight Measures”) for public comments, and some readers of the mining circle left us a message asking about the policy and how to understand it. Some readers of the mining circle have left comments asking us questions about how to understand the policy. We have sorted out and studied the documents issued by the Inner Mongolia Autonomous Region involving virtual currency mining, and combined them with the relevant recent regulatory policies, the interpretation of the relevant content is organized as follows.

The article is a bit long, so we will post the core points first.

I. Inner Mongolia’s adjustment of virtual currency mining behavior is within its 14th Five-Year Energy Consumption Double Control Target, and it just so happens that virtual currency mining was also explicitly mentioned in the Financial Committee’s meeting a few days ago in terms of financial risk prevention and control, so we can understand that the current “eight measures” were introduced in the context of the double “policy” support.

II. This crackdown on mining in Inner Mongolia, to a certain extent, presents the complete scope of China’s current regulation of mining and trading of crypto assets such as Bitcoin. That is, on the one hand, in financial risk prevention and control, such as illegal fund raising, money laundering and other financial crimes. Due to the overall situation of the current crypto asset boom, the individual risks have intensified and increased social instability, and there is a trend of individual risks passing to the social field, which makes the country take some measures at the macro level of financial prevention and control; on the other hand, there are energy consumption considerations, and some areas may indeed have some irregular mining behaviors, or some areas need to be upgraded and adjusted in terms of energy consumption and industrial structure Stripping this part of the industry, this is the current basic posture. So if you want to judge what kind of policy to introduce in the next region, you can start from these two aspects.

In fact, the development of any industry has to go through a certain repair process. I do not think the recent policy is a one-size-fits-all regulation of mining and crypto asset trading. On the contrary, if proper regulatory measures are constantly introduced, it is conducive to the long-term and orderly development of the whole industry. Wouldn’t it be better to throw a little cold water on the situation if it really gets overheated? The industry has been sinking for more than ten years, may the next decade, we can be better.

o1 The background of the “Eight Measures

One is the 51st meeting of the Financial Stability Development Committee of the State Council held on May 21. This meeting was chaired by Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council and Director of the Financial Committee, with relevant comrades in charge of the members of the Financial Committee attending the meeting. In that meeting, which in the second article resolutely prevent and control financial risks in the clear mention of crackdown on bitcoin mining and trading practices. Therefore, we can understand that one of the purposes of the Eight Measures is to implement the spirit of the meeting of the Finance Committee and prevent financial risks.

The second is the implementation of the “Inner Mongolia Autonomous Region on Ensuring the Completion of the “14th Five-Year Plan” Energy Consumption Double Control Target Measures” (hereinafter referred to as “Safeguard Measures”). The Safeguard Measures were also issued by the Development and Reform Commission of Inner Mongolia Autonomous Region on February 25, 2021. It is clearly mentioned that (1) in Part II, Article 7, “Accelerate the structural adjustment of high energy-consuming industries”, it is stated that “the scale of data center construction is controlled in a reasonable and orderly manner, and new virtual currency mining projects are strictly prohibited.” (2) In Part II, Article 9, “Virtual Currency Mining”, it is clearly stated that “the comprehensive cleanup and shutdown of virtual currency mining projects will be fully withdrawn by the end of April 2021.”

In summary, the Inner Mongolia Autonomous Region, in implementing the decision of the Party Central Committee and the State Council on the dual control of energy consumption, has formulated the “14th Five-Year Plan” of the autonomous region’s dual control of energy consumption, and virtual currency mining is regarded as a high energy-consuming industry and has been adjusted. The introduction of this policy is not the first time the autonomous region proposed, in some of the previous policies and documents can also see some clues. For example, on March 4, 2021, the “region to be fully cleaned up and shut down by the end of April bitcoin mining business” was released.

It clearly also points out that the scale of capacity of high energy-consuming industries should be controlled, the scale of data center construction should be controlled in a reasonable and orderly manner, new virtual currency mining projects should be strictly prohibited, and virtual currency mining projects should be comprehensively cleaned up and shut down, and all of them should be withdrawn by the end of April 2021.

In fact, the earlier time can be traced back to the 2019 Inner Mongolia Autonomous Region Local Financial Supervision Bureau’s “Analysis of the financial situation in the first half of 2019”, which clearly pointed out that “comprehensive cleanup and rectification of the financial market order. The implementation of the prevention and disposal of illegal fund-raising local responsibility and the main (supervisory) supervision of each industry responsibility. Do a good job of disposal of old cases. Do a good job of key industries and risk enterprises and cross-regional clues notification and collaborative disposal. Carry out regular publicity and education. Continuously promote the Internet financial risk remediation work. Do a good job of P2P network lending risk remediation. Accelerate the clearance of “mining” enterprises.”

Therefore, Inner Mongolia for virtual currency mining behavior adjustment, itself in its fourteen five energy consumption within the task of dual control objectives, and, just a few days ago the Finance Committee meeting in the prevention and control of financial risks also clearly mentioned virtual currency mining, we can understand the current “eight measures” introduced on the background is a double “policy” added.

To summarize.

On the one hand, at least for the time being, virtual currency mining is considered a high energy-consuming activity, and the Inner Mongolia Autonomous Region government has clearly defined the goal of double control of energy consumption in its 2021 work plan, and virtual currency mining is included in the scope of adjustment when formulating specific implementation plans.

On the other hand, virtual currency mining and trading practices are considered to have financial risks. From the perspective of the capital market, the deepest and most original purpose of all legislation on securities management in the traditional securities market is to “protect investors”, to balance the interests of both supply and demand in the securities market through the protection of investors, and to ensure the healthy and sustainable development of the securities market.

For example, the concept of “qualified investor” protects investors by setting a threshold for participation. However, in the field of crypto-assets, everyone can participate and there is no corresponding threshold. This has caused a large number of retail investors (who are relatively lacking in risk perception and risk prevention ability) to enter the market, and since the current trading of crypto assets is carried out under the lack of supervision, it is difficult to effectively protect the rights and interests of investors after disputes arise. This not only undermines the financial order, but also causes huge economic losses to the majority of participants, thus exacerbating the existence of social instability factors.

o2 Interpretation of the Eight Measures

In further understanding the meaning of the content of the Eight Measures, we need to clarify the current overall opinion of the Inner Mongolia Autonomous Region on mining, which is conducive to a more comprehensive and accurate understanding of the Eight Measures, namely: the strict prohibition of new virtual currency mining projects, a comprehensive cleanup and shutdown of virtual currency mining projects.

First, the industrial parks, data centers, self-provided power plants and other subjects for virtual currency “mining” enterprises to provide sites, power support, according to the “Energy Conservation Law of the People’s Republic of China” “Electricity Law of the People’s Republic of China” and other relevant laws and regulations, increase energy-saving monitoring efforts, reduce energy consumption budget indicators; the existence of deliberate concealment, withdrawal and shutdown is not timely, approval and supervision is not effective, according to relevant laws and regulations and party regulations to seriously pursue accountability.

Interpretation: The subject of this article is “industrial parks, data centers, self-provided power plants”, and the behavior includes providing sites and power support. This part of the subject may become the focus of the next screening. And a week ago, the Inner Mongolia Development and Reform Commission also issued a notice on the acceptance of virtual currency “mining” enterprise issues letter report, open the reporting platform.

Second, for the big data center, cloud computing enterprises and other subjects exist virtual currency “mining” behavior, by the competent departments to cancel all kinds of preferential policies, withdraw from the Inner Mongolia power multilateral trading market, according to the “Energy Conservation Law of the People’s Republic of China” to deal with strictly, seriously held accountable.

Interpretation.

(1) is aimed at the name of big data, cloud computing, engaged in virtual currency mining subject. The Eight Measures” for such enterprises is to cancel the application of preferential policies and pursue responsibility in accordance with the law.

(2) Inner Mongolia issued and implemented the Measures for Access and Management of Market Subjects of Inner Mongolia Electricity Multilateral Trading in the North China Regional Electricity Market (hereinafter referred to as the “Measures”) on September 26, 2016, which adopt a market access mechanism and set access conditions, and for market subjects that violate the Measures, the relevant departments have the right to order rectification within a certain period of time, and cancel their trading qualifications if the rectification is completed and still fails to meet the requirements; and market subjects that are disqualified from trading may, in principle, apply to the electricity management department for market access again only one year after the disqualification.

(3) The purpose of the “Energy Conservation Law of the People’s Republic of China” is to promote energy conservation in society as a whole, and further reflects the fact that the local regulatory authorities in Inner Mongolia have determined that the act of “mining” itself is not an effective and rational use of energy. Once upon a time, Bitmain’s project was a key project in the region, which is saddening.

Third, the communication enterprises, Internet enterprises and other subjects exist virtual currency “mining” behavior, according to the “People’s Republic of China Telecom Regulations” relevant provisions, by the competent departments in accordance with the law to revoke value-added telecommunications business license, seriously pursue responsibility.

Interpretation: Horizontally, the crackdown on mining has been increased, and the scope has been extended to some telecommunication enterprises and Internet enterprises. According to the law, China implements a licensing system for telecom business operations. Telecommunications business is divided into basic telecommunications services and value-added telecommunications services. Operating telecommunications business, you must obtain a telecommunications business license issued by the telecommunications management agency in accordance with the provisions, not obtained is not allowed to engage in.

Fourth, the existence of virtual currency “mining” behavior of Internet cafes and other subjects, by the competent authorities in accordance with the law on its suspension and rectification and other disposition.

Interpretation: vertically, and even extend the crackdown to the Internet bar. According to the law, the opening of Internet cafes need to apply for “network culture business license”, mining behavior certainly does not belong to its legal scope of business, beyond the scope of operation, its competent department (cultural administrative departments) can take measures to suspend and rectify.

Fifth, the unapproved private access to power supply virtual currency “mining” projects and other subjects, according to the “Criminal Law of the People’s Republic of China” and other relevant laws and regulations, its illegal power theft referred to judicial organs in accordance with the law.

Interpretation: for the theft of electricity mining behavior. As mentioned in the Blockchain Criminal Justice Big Data Report released by the Chain Law in 2019, the crime of theft (electricity theft mining) is currently the most numerous case involving blockchain-related criminal offenses.

Sixth, for enterprises, individuals and other subjects with illegal acts such as money laundering in the form of virtual currency, they will be transferred to judicial organs according to the Criminal Law of the People’s Republic of China and other relevant regulations.

Seven, the existence of enterprises, individuals and other subjects using virtual currency for illegal fund-raising and other acts, according to the “Regulations on Prevention and Disposal of Illegal Fund Raising” and other relevant laws and regulations, the competent departments to deal with strictly.

Interpretation: Article 6 and 7 are some of the prevailing problems, such problems are not only in Inner Mongolia, in any place will be subject to legal regulation and crackdown.

Eight, the existence of virtual currency “mining” behavior of the relevant enterprises and related personnel, in accordance with the relevant provisions of the blacklist of bad faith; the use of public officials to take advantage of their positions, participate in virtual currency “mining” or to provide convenience and protection, all transferred to the discipline inspection and supervision organs.

Interpretation: belongs to the scope of the construction of social credit system in Inner Mongolia. The red list is the list of joint incentives for trustworthiness, and the black list is the list of joint punishments for breach of trust. The target should be some dishonest, dishonest, concealing the electricity situation of enterprises or personnel, such personnel will be included in the blacklist by the local regulatory authorities, the credit restraint mechanism for “a breach of trust, everywhere subject to restrictions”.

Of course, the above is the content of the draft for comment, the final version of the implementation may be adjusted.

On the whole, the release of the document is the inheritance of Inner Mongolia has been treating virtual currency mining to take the attitude of retreat, shutdown, which does not change anything substantial. It’s just that the content of the Eight Measures is more specific, specifying the corresponding subjects, the corresponding behavior and the corresponding disciplinary measures.

This crackdown on mining in Inner Mongolia presents, to a certain extent, the complete scope of China’s regulation of mining and trading behavior of crypto assets such as bitcoin at this stage.

That is, on the one hand, in financial prevention and control, such as illegal fund raising, money laundering and other financial crimes. Due to the overall situation of the current crypto asset boom, it makes the individual risks intensify and increases the social instability factors, and there is a trend of individual risks passing to the social field, which makes the country take some measures at the macro level of financial prevention and control.

On the other hand, energy consumption is a consideration, some regions do have some illegal mining behavior, or some regions need to strip this part of the industry in terms of energy consumption, industrial structure upgrading and adjustment. This is the current basic situation. For example, Inner Mongolia’s “14th Five-Year Plan” energy consumption double control target policy.

In fact, the development of any industry has to go through a certain repair process. I do not think that the recent policy is a one-size-fits-all regulation of mining and crypto asset trading, but on the contrary, if proper regulatory measures are introduced continuously, it is beneficial to the long-term and orderly development of the whole industry. The industry has been sinking for more than ten years, and I hope we can be better in the next decade.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-to-understand-the-recent-regulatory-policy-take-the-introduction-of-eight-measures-to-combat-mining-in-inner-mongolia-as-an-example/
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