Cryptocurrency mining has become the latest target for the Chinese government seeking to phase out industries considered a drag on the country’s economy.
The National Development and Reform Commission (NDRC), the top economic planning agency in the world’s largest market for bitcoin mining, released on Monday a list of sectors it plans to promote, restrict or eliminate. Crypto mining, the process of creating Bitcoin and other digital currencies through the use of computing power, was namechecked alongside a swarm of other sectors the agency wanted to “eliminate” because they “lacked safe production conditions, seriously wasted resources, polluted the environment,” among other issues.
Bitcoin’s valuation famously slumped in 2018, falling from a record $20,000 in December 2017 to below $4,000, but this piece of news from China comes amid a period of renewed optimism. Last week, Bitcoin’s value rocketed above $5,000 for the first time since November 2018.
The official announcement, which comes in the form of a revised list awaiting public comment, does not exert regulatory power. The agency did not put a proposed deadline for when crypto mining should be banned. While such guidelines normally hint at Beijing’s attitude towards an industrial activity, some points out that the NDRC’s guiding list, which renews every few years, has had limited impact on industries it has wanted to cut.
“Items that should be eliminated by end of 2006 are still in the 2011 and 2019 versions,” noted Dovey Wan, founding partner at blockchain-focused Primitive Ventures, in a tweet.
The ban, if carried out, would deal a massive blow to a series of Chinese companies that rode the crypto wave by providing mining and production tools to the industry. In particular, Bitmain — which recently lets its application for a proposed Hong Kong IPO lapse — would be significantly impacted by a ban. Bitmain’s mining-optimized hardware is widely acknowledged as the top provider of mining hardware, and as much as 94 percent of the company’s revenues in the first half of 2018 came from “Antware”, its crypto mining device.
A spokesperson for Bitmain declined to comment on the news when contacted by TechCrunch.
The crypto sector has drawn close scrutiny from Beijing amid concerns over frauds and speculation, which led to a ban on initial coin offerings in 2017. Meanwhile, environmentalists have protested wasteful energy consumption that bitcoin mining incurs. China was reportedly planning to restrict power supply for some bitcoin miners early last year, according to sources cited by Bloomberg.
This is not the first time China has mulled a clampdown on crypto mining. In January 2018, Beijing was said to ask local governments to discourage bitcoin mining enterprises, according to documents obtained by Chinese financial news publication Yicai. But local officials may be reluctant to embrace such guidance. Much of China’s crypto mining activities happen in its sparse, underdeveloped hinterlands where energy is in the surplus and the governments are eager to boost production. Whether the new order coming from the powerful NDRC will put further deterrent on the industry is up in the air.