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- Bitcoin mining is a time and electricity consuming process that has hurt China’s climate goals due to its environmental concerns
- Mining companies plan to relocate to Central Asia, which is closer to home and provides cheap electricity
- The ban does reduce China’s dominance over mining activity but continues to eat the bigger pie
China has dominated the crypto mining business and accounts for one-third of the Bitcoin supply. It has a cheap source of electricity that has led to many miners setting up camp in Sichuan and Yunnan provinces and shifting North to coal-rich regions of Inner Mongolia and Xinjiang. Until May 21, it was a highly underregulated market, but environmental concerns raised severe concerns over the same.
A ban on mining and trading activities of cryptocurrency in the country has stopped the juggernaut. The industry is poised to rank among the top 10 electricity consumers as solving complex mathematical problems requires sufficient electricity. It has opened the gates to the West for many miners as scouting for new places has already begun.
Mining regulations in China hurt the crypto community.
The ravenous regulations that the country has come up with have sent crypto prices tumbling. The regulations are being interpreted that the industry’s existence in China is under question. The cryptocurrency market was left vulnerable after the sanctions, although few governments continue to embrace bitcoin.
The Chinese government is already running the pilot program of its digital Yuan in multiple provinces as the crypto trading ban was reiterated this year. In a couple of instances, the government had warned of the regulations, but entrepreneurs failed to pay heed to it.
Moreover, the mining activities hurt the Xi Jinping government’s environmental concerns, with its primary aim being reducing coal usage. The introduction of the digital Yuan will boost the economy and pose stiff competition to other cryptocurrencies. The former will have the government’s backing and will enable trustworthy transactions that are transparent and secure.
The West opens its doors
The regulations do not mean that cryptocurrency mining will be stopped completely. The US has increased its share of producing Bitcoin to 7% over the last year. It is on track to compete against the Chinese dominance. However, the latter will still hold the majority of production.
Operations have started to move to North America and Central Asia with Jiang Zhuoer, founder of mining company BTC.TOP, claiming to move to Central Asia that is closer home and cheaper cost of electricity.
The door has been left ajar as several states in the US are now open to accept mining operations. Although they will miss out on mining activities for over 2-4 weeks, they will be settled in a sound environment with little or no political turbulence.
Regulations to improve the financial system
The blockchain network has the potential to disrupt the finance industry in any country. Placing sanctions on the same might have long term repercussions, but China is concerned about its environment.
Countries with predictable regulatory regimes have seen a spike in demand for mining activities. The cowboy image of China’s mining power is in shatters as overseas assignments have increased.
Marathon Digital Holdings Inc, the Las Vegas-based mining company, has ordered 70,000 mining machines to expand operations in the country. It will take time to smoothen out the price curve and reduce volatility as seething regulations across countries have hurt investor sentiments.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
