Preview of Chinese Government Crypto Mining Regulations

Having a population of over 1.3 billion, China was the main home of crypto and bitcoin from inception to 2021. Major crypto-focused companies like Bitmain and others set up homes in major Chinese cities, mainly Beijing.

In fact, in 2021 and before, China was considered a global hub for the cryptocurrency ecosystem. Data from Cambridge Centre for Alternative Finance (CCAF) indicated that China was the globe’s largest creator of bitcoin.

Reports indicated that greater accessibility to hardware was the main reason China towered as the top crypto miner. 

China was among the first countries to consider creating a Central Bank Digital Currency (CBDC). The country is among the world’s first to launch a CBDC, despite the project being at the end of massive criticism in recent weeks. 

However, between 2021 and now, things have changed for the worst in China.



Crypto Mining in China

One of the regulations everyone aims to understand in China is crypto mining. So, what is the general regulation about this popular activity in China?


Mining is Banned in China!

According to reports, China made its first consideration of Bitcoin mining back in 2019. During this period, China discussed the possibility of completely eradicating this popular activity from the country. 

Of course, being one of the most tech-savvy countries, many Chinese were already mining crypto. There were already major Bitcoin mining networks at the time, including Pooling, considered the world’s second-largest Bitcoin mining network. 

Furthermore, reports indicate that China was already home to about 70% of the global bitcoin mining power. 


The Actual Ban in 2021

China banned crypto mining first in 2019 before officially declaring it illegal in 2021.

According to reports, the NDRC of China released a circular that allegedly insisted that any investments associated with new crypto-mining projects should be declared illegal.

This circular opened the crypto ecosystem for a crackdown with the sole intention of taking mining down. This ban meant that every bitcoin mining activity was illegal in the country.

Repercussions of the New Regulations

The new legislation set up proper guidelines about what will come to anyone caught performing illegal activities. Among the repercussions are as follows, according to reports; 

  • Anyone caught mining bitcoin, or any other PoW cryptocurrency, could face jail terms based on the country’s legislation.
  • Anyone employed in the bitcoin mining sector can equally face jail terms.
  • This mining ban also meant sending crypto, or businesses and institutions accepting crypto is now illegal.

Therefore, the possession and operation of mining equipment in China are currently illegal. 



Reasons for Banning Mining

There are a couple of reasons for the recent banning of mining activities. Some of the reasons were provided at the time and even before the bans were announced; 


Carbon Neutrality

The main reason, theorized initially by experts, that drove the ban on BTC mining in China is the mission to attain carbon neutrality. In late 2020, the President of China, Xi Jinping, pledged to achieve carbon neutrality by 2060. Since the announcement, China has taken seriously its efforts to fight the mining of crypto assets. 


Energy Consumption

Another reason mainly used to explain China’s harsh take on crypto mining is energy consumption. Both carbon neutrality and energy consumption are often considered intertwined. High energy consumption usually means high carbon neutrality. 

Hence, the Chinese ban on bitcoin and crypto mining was because of the massive energy consumption.

Inner Mongolia announced plans to eliminate bitcoin mining a few years ago. This was even before the official ban on bitcoin mining in China was announced.



The Mass Exodus

Finally, after exploring the general regulation around BTC mining, it’s vital to understand the impact as noticed following the ban. The crackdown on BTC miners caused an almost immediate exodus of Chinese-based bitcoin miners.

Many seemingly began moving to countries with cheap electricity, including Canada, Russia, Kazakhstan, and the United States. Bitmain, a powerhouse in the mining industry, providing mining equipment and even offering the Antpool mining pool, moved some of its mining machines to Kazakhstan.

Despite the current regulatory environment, which appears very tough in the US, the country is considered the center of Bitcoin mining. Texas has been open for crypto business in a mission to stay ahead as the central hub for mining. 

Following this announcement, BTC’s price dropped to about $30k from $55k. Moreover, the mining hash rate in China mining hash rate plunged vastly. The mining activities continued but dropped vastly due to the new restrictions. 

The announcement of the mining ban immediately triggered a crackdown involving revoking licenses and even cutting down power. 

Interestingly, some research declares that despite the crackdown, China is still the second-largest bitcoin mining country in the world. 


Final Word

This guide has been looking into the entire idea of mining and the regulatory environment of this activity in China. Despite being the crypto hub for some time, China banned all crypto mining activities in 2021. The reasons based on reports included energy preservation and reduction of carbon footprint. 

Persons engaged in any form of mining, including being employed in mining companies, face harsh repercussions, including jail terms. The strict regulations led to a severe exodus of bitcoin users in China.