The Chinese government is continuing to put pressure on the cryptocurrency industry and is now looking at restricting or eliminating bitcoin mining according to a report by Reuters.
The report states:
“China’s state planner wants to eliminate bitcoin mining in the country, according to a draft list of industrial activities the agency is seeking to stop in a sign of growing government pressure on the cryptocurrency sector.”
This may appear to be a negative step at first glance, it is worth remembering that this is one of many actions China has taken against the crypto markets in recent years and most have had little impact on the markets.
Jehan Chu, managing partner at blockchain investment firm Kenetic said:
“The NDRC’s move is in line overall with China’s desire to control different layers of the rapidly growing crypto industry and does not yet signal a major shift in policy. I believe China simply wants to ‘reboot’ the crypto industry into one that they have oversight on, the same approach they took with the Internet.”
Bitcoin mining regulatory scrutiny continues
Last week, the price of bitcoin jumped nearly 20 percent in its best day since 2017 bubble, and went above $5,000 for the first time since mid-November.
Bitcoin, which accounts for around half of the cryptocurrency market, was down by around 1.4 percent on yesterday, while Ethereum and Ripple’s XRP also fell by similar amounts.
The cryptocurrency sector has been under heavy scrutiny in China since 2017, when the government began to ban initial coin offerings and close local cryptocurrency trading exchanges.
The Chinese government also began to limit cryptocurrency mining, forcing many firms to find bases elsewhere.
Nearly half of bitcoin mining pools are located in the Asia-Pacific, a Cambridge University study said in December.
Alex de Vries, a consultant with PwC in Amsterdam who specializes on blockchain and researches cryptocurrency mining said:
“Half of the network is probably located in China,”
He added that the number of mining facilities in the world is still limited to several hundred.
Mati Greenspan, an analyst with eToro, said any ban by China would cut a key supply of cheap electricity for the industry and raise the average cost to mine bitcoin.
Chinese companies are also among the biggest manufacturers of bitcoin mining gear, and last year three filed for initial public offerings in Hong Kong, looking to raise billions of dollars.