China (like other countries) and Bitcoin have had what can only be described as a tempestuous relationship.
Well, the Chinese government is the erratic one, because Bitcoin doesn’t do emotions. China is the main region of the world for mining, and no doubt brings in a lot of revenue. However, the Chinese government has always blown hot and cold on the whole cryptocurrency space.
So, what is China’s stance on Bitcoin mining?
China and Bitcoin Mining
Any government needs innovation and as much industry as possible. China, in the last 3 years, has seen phenomenal GDP growth.
This was mostly from manufacturing, and it has led to China becoming the second most powerful economy in the world. With manufacturing waning and the economy slowing down, however, it goes without question that China should welcome any promising and growing industry.
However, with the constant flip-flopping of the cryptocurrency space in general, is the government thinking of banning mining?
A ban on Bitcoin mining would obliterate some of China’s biggest businesses in China.
Large Bitcoin mining companies such as Bitmain and Canaan are based in China. If the government was to ban it, then they and other huge mining revenue earners would simply uproot and base themselves elsewhere.
China Has Banned Crypto Before?
At the height of the bullrun in 2017, China placed an outright ban on trading cryptocurrencies, but actually pardoned the mining industry.
The government then lifted the ban in December 2018,. This was after The Shenzhen Court of International Arbitration ruled in favor of crypto assets being used for trading currencies.
This is typical of China’s wavering stance on the crypto space, and leads many to believe the leaders there are simply manipulating the price to line their own pockets.
Will China Ban Mining?
In Q2 last year, China’s National Development and Reform Commission (NDRC) listed Bitcoin mining as an industry it wanted to limit. Furthermore, it discouraged or restricted because it didn’t adhere to relevant laws and regulations. Moreover, it was considered “unsafe, illegal or bad for the environment.’ This consideration was then overturned in Q4 last year.
The NDRC said at the time that they had received over 2,500 suggestions on various issues regarding the list. These suggestions had also been taken into consideration.
Although, it must be stated that Bitcoin mining wasn’t mentioned specifically, and other industries were also removed from the list.
But it does seem like a complete about-face from the Chinese government, so what was their game in the first place?
China’s guidelines are still as vague as ever. Nobody outside of the government really knows what the intention is. That being said, China dominates the Bitcoin mining space. So it would be a huge blow to the economy if they were to ban it.
Jehan Chu, a Hong Kong based investor, believes the Chinese government is playing games. This is with the intention of trying to control the space. “I believe China simply wants to reboot the crypto industry into one that they have oversight on,” said Chu. The same approach they took with the internet.
China Controls The Internet, Can It Control Bitcoin?
Obviously, the government has complete control of the Internet in China. There are no western social media sites allowed in the country, and the news there is heavily censored.
But can China take control of the Bitcoin network?
No doubt the Communist regime can take control of the mining. Whatever is done inside the country, it can seize control of.
So it begs the question: Is China encouraging Bitcoin mining in the country before it makes a move like that?
Chinese hashrate dominance is waning. Back in 2017 more than 70% of the Bitcoin hahsrate came from China. However, by late last year that figure was down to about 65%.
Moreover, with bigger mining farms under construction in places like Texas, that dominance will only drop further, unless China opens its arms and welcomes more industry.
With the drop in hashrate dominance, surely if China wanted to take control of Bitcoin it would have to act sooner rather than later?
China Will Keep The Door Open To The Mining Industry China has always been hard to predict. Its wavering stance on the crypto space is frustrating, but the narrative there is changing.
No doubt the Bitcoin mining industry is a huge net gain for the Chinese economy, and surely the government realizes its not going anywhere. China has to welcome the mining industry.
It is the main player in the space for now, but that is weakening. For it to claw back its dominance and has to welcome the big players.
It has some of the cheapest electricity in the world, and the climate is better for mining there than places like Texas.
China, like all governments, is coming around to the idea of Bitcoin and cryptocurrencies. It realizes it’s not going to go away and that there is huge earnings potential in crypto assets and the mining industry.
The narrative is changing and I believe we will see major investment from the Chinese government in the mining space.
Author: Tommy Limpitlaw;