This article aims to explore the logic behind the regulation under the premise of clarifying the general policy environment, so as to provide some reference opinions for industry practitioners, and does not represent the author’s public comments on the regulation. As a practitioner in the industry, I hope that the enforcement of regulation should be listened to and understood, and that it should be strong without losing scale and temperature.
o1 Financial Security and Bitcoin
Financial security concerns the fundamental interests of the country, is an important part of national security, but also an important foundation and prerequisite for the smooth and healthy development of the economy.
Since the 18th Party Congress, topics related to financial security have twice been the subject of collective study by the Political Bureau of the CPC Central Committee.
In today’s situation where the global financial market is in violent turmoil, it is even more important to steadily grasp financial security. Maintaining financial security is related to the overall national strategy.
Starting from the end of 2020, the crypto digital asset market started a bull market. First, mainstream digital assets represented by bitcoin and ethereum kept breaking new highs. Bitcoin once exceeded $64,800, more than three times the peak of the previous bull market. And ethereum coin price also kept breaking through the highest point, up to $4370.
Entering April this year, dogcoin saw a surge. Other Meme tokens, such as SHIB (Shiba Inu coin), AKITA (Akita Inu coin) and PIG (Pig coin), followed by Dogcoin as the representative, also saw a surge, and FPMO sentiment prevailed.
If “universal coin speculation” is an exaggeration, then “out of the loop” for crypto-digital assets should be an objective assessment. In the regulatory view, bitcoin is synonymous with these crypto assets.
First, three associations issued the “Notice on Preventing the Risk of Speculation in Virtual Currency Trading”.
Later, on May 21, at the fifty-first meeting of the State Council Financial Committee chaired by Liu He, it was clearly stated that financial risks should be resolutely prevented and controlled. Adhere to the bottom-line thinking, strengthen the all-round scanning and early warning of financial risks, promote the reform of small and medium-sized financial institutions to reduce risks, focus on reducing credit risks, strengthen the supervision of financial activities of platform enterprises, crack down on bitcoin mining and trading, and resolutely prevent the transmission of individual risks to the social sector.
Bitcoin mining and trading, pointing to the bitcoin industry (crypto asset industry), regulatory saber pointing to the industry, what exactly is the financial risk? How exactly does it threaten financial security?
From the perspective of the traditional securities issuance and trading market, countries around the world have maintained a strict regulatory attitude towards securities issuance, so as to protect the legitimate rights and interests of investors and maintain social and economic order and public interest.
In the process of long practice, the regulatory thinking and framework of securities issuance and trading in various countries have become mature. The focus of regulation is to protect investors in the securities market, and generally follows the regulatory logic that “the intensity of regulation is directly proportional to the possibility of damage to investors’ interests, and inversely proportional to investors’ own professionalism and risk tolerance”.
In the past, crypto asset trading and bitcoin mining were niche markets. But after ten years of development, and with the end of last year, bitcoin out of the circle, more and more ordinary people who know little about blockchain and have a low risk tolerance have participated in it, and the volume is there.
In addition, “illegal fundraising + blockchain” is used by unscrupulous elements, the capital plate is widespread (such as Plustoken, Wotoken, etc.), and tens of thousands of ordinary investors have lost a lot of money.
In the case of increasing individual risks, social instability has increased and there is a tendency for individual risks to pass to the social sphere, which has prompted regulation to increase its efforts in financial risk prevention and control. This is an important reason why exchange leveraged contracts are no longer open to new customers and many cloud computing platforms are no longer available to domestic users after the 5.21 meeting.
In addition, China’s central bank digital currency has ridden the wave. The majority of people today still refer to crypto assets such as Bitcoin as digital currency, which in itself is contrary to the regulatory emphasis that “although Bitcoin is called “currency”, but because it is not issued by the monetary authorities, does not have the monetary properties such as fiat and compulsory, and is not a true sense of money. ” The argument goes against the grain.
As Li Lihui, former governor of the Bank of China, recently said at the first “2021 West Coast Fintech Frontier Forum”, “virtual currencies represented by Bitcoin are still able to survive and develop, and have largely become the catalyst for central banks to promote the research and development of digital currencies. First, in the digital era, how to create an efficient and reliable legal digital currency to deal with the impact of virtual currencies on the current monetary system and financial system ……
The popularity of bitcoin is both a catalyst for the central bank’s digital currency research and development, but also a shock to the modern monetary system and financial system. Nowadays, the central bank digital currency is ready to be launched, and the legal tender is in urgent need of a proper origin. The control of bitcoin is also a proper name for the central bank digital currency.
o2 Energy Security and Mining
On the whole, China’s energy security is an internal and external problem.
On the internal side, as early as 2010 China became the world’s largest energy consumer, but energy is in short supply, and the consumption structure is unreasonable, with coal accounting for too large a proportion and serious environmental pollution. In terms of external problems, China’s oil supply is insufficient, and the degree of foreign dependence even exceeds 70%, and the energy transportation path is too concentrated (over-reliance on the Malacca Strait), which is vulnerable to other countries’ constraints.
In addition, China is also facing serious energy environmental problems, and these environmental pollution problems, but also seriously affect the sustainable development of our economy, such as haze.
The sources of electricity include coal, nuclear power, natural gas, water, wind and light. The current stage of China’s excessive reliance on coal has seriously affected the sustainable development of the energy industry.
The energy security problem, the situation is serious.
Internationally, since September 2020, President Xi has announced China’s “3060” goal seven times.
The first time was on September 22, 2020, at the 75th General Debate of the United Nations General Assembly, when he declared that China would strive to peak its CO2 emissions by 2030 and achieve carbon neutrality by 2060.
Subsequently, he delivered video messages at the United Nations Biodiversity Summit, the Third Paris Peace Forum, the 12th BRICS Leaders’ Meeting, the G20 Leaders’ Summit in Liard, the Climate Ambition 2020 Summit, and the Davos Agenda at the World Economic Forum, respectively.
Domestically, the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China also proposed to include carbon peak and carbon neutral targets in the 14th Five-Year Plan.
At the Central Economic Work Conference in December 2020, it was proposed that “achieving carbon peaking and carbon neutrality” would be one of the eight key tasks in 2021.
Solving the carbon emission problem is a requirement of our energy strategy. Externally, it is our commitment to the world.
So, Inner Mongolia has taken the first step: cracking down on virtual currency “mining”. (A previous Caixin article had disclosed that Inner Mongolia had previously been named for not meeting energy consumption standards.)
At this stage, the regulator still considers bitcoin mining to be a high-energy-consuming practice, as evidenced by recent official opinion.
The general concern is what policies will be introduced in the Sichuan region.
In the popular perspective, the Sichuan region is rich in hydropower resources. But at the same time we must understand: electricity has a “real hair practical, can not store or storage costs high” characteristics. Combined with the imbalance between supply and demand and the limited transmission channels, this is the main reason for the abandonment of electricity.
On the whole, China’s energy and power flow has a reverse demand and supply distribution characteristics.
Southwest China has good resources, but low energy consumption level. And East China is mostly a large energy-using province, but the resource endowment is poor. In this context, China adopts the strategy of sending electricity from the west to the east and from the north to the south, and solves the problem of renewable energy consumption through cross-provincial and cross-regional channels as well as ultra-high voltage.
Sichuan Province is the largest hydropower output base in China. That is to say, its electricity must not only meet the needs of the province, but also be sent out for use by other large energy-using provinces.
The limited transmission channels directly limit the amount of electricity it can supply.
At this stage, with the establishment of China’s ecological civilization development strategy, as well as the aforementioned carbon peak carbon, coupled with the energy sector’s dual control objectives (i.e., the total amount of energy and consumption of dual control), coal control and consumption reduction is the top priority at this stage of work, so Inner Mongolia has become the front-runner. And in areas such as Sichuan, the construction of modern power systems to adapt to wind, light, water, so as to go to solve the problem of renewable abandoned electricity, is the focus of the current work.
Data show that the growth rate of electricity consumption in Sichuan has been high since the last two years, especially in the first four months of 2021 (crypto asset bull market), which makes Sichuan’s power supply face the dilemma of internal and external problems. Domestic demand is soaring and external power supply is under pressure. At one point, there were power cuts and supply and demand imbalances.
In addition, some small hydropower development, due to the need to build the terrain difference, in the view of the regulatory authorities this is not a small pollution of the environment.
For the local Sichuan, the imbalance between supply and demand of electricity may lead to a policy tilt in the use of electricity, for example, in the existing power supply compared to the mining industry will tend to other industries.
Both macro policy pressure, or recent regulatory trends, as well as the recent imbalance in electricity consumption, are forcing Sichuan to introduce corresponding policies in the near future.
So next, we judge that.
First, officials will definitely adopt a clearance policy on mining in general.
Second, small hydropower will be rectified, such as rectification of the unqualified ones and retrieval of the expired private small hydropower.
Third, data center enterprises may become the focus of the clearance, but there will be no great impact on the normal business of the data center itself. And the subsequent energy consumption and electricity consumption of data center-type enterprises will be more strictly reviewed.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/introduction-to-finance-energy-bitcoin-mining/
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