Crypto miners look beyond China as government threatens crackdown

Several cryptocurrency mining operators reportedly have halted their activities in China amidst increasing threats of a government crackdown. A senior official had called for the need to mitigate financial risks and more closely monitor activities on business platforms. 

Chinese vice premier Liu He said late-Friday the country’s financial infrastructure must remain robust and guard against disruptions. Doing so would require the use of monetary policies to mitigate financial risks, noted Liu, who was speaking at the 51st meeting of the Financial Stability and Development Committee, which he chaired.

In stressing the need to identify potential financial threats, he outlined the need to bolster the monitoring of business platforms that facilitated financial activities as well as crack down on Bitcoin mining and trading transactions. The mention, though, was brief and he provided no further details on possible regulations. 

However, his statement marked the first time a top Chinese government official had referred specifically to crypto mining. It comes just days after three state-backed financial groups in China issued a joint statement warning against the use of cryptocurrencies as payment and reminded industry players that digital currencies should not be used in any financial activities in the country.  

Liu’s remarks also prompted several crypto mining operators to halt their activities in China and look overseas for alternative mining sites, according to a Reuters report. Crypto exchange Huobi’s subsidiary Huobi Mall said via a Telegram statement Sunday that it had suspended its local businesses and was in discussions with overseas service providers for the “exports of mining rigs”. It told customers “not to worry and calm down”. 

Fellow crypto mining operator HashCow said it would stop purchasing new BItcoin rigs and would refund customers that had ordered compute power but had not begun mining. The company owns 10 mining sites in China, according to Reuters.

BTC.TOP also halted its activities in China, with its founder Jiang Zhuoer pointing to regulatory risks. In a post on microblogging platform Weibo, Jiang said the crypto mining pool in future would operate mainly in North America as Chinese authorities clamped down on mining activities. 

He further noted that China was likely to lose its crypto computing power to foreign markets in future, with mining pools in the US and Europe taking dominance. 

Researchers last month cautioned that, unless more stringent regulations were implemented, China’s crypto mining could undermine the world’s sustainability efforts. The report estimated that the country accounted for more than 75% of Bitcoin’s hashing power or calculations, fuelled by China’s proximity to manufacturers of the required hardware and access to cheap power. 

While it had outlawed financial activities involving cryptocurrencies, the Chinese government had created its own alternative that is commonly described as the digital version of the yuan or renminbi (RMB). Called Digital Currency Electronic Payments (DCEP), the digital yuan was developed on blockchain and cryptographic technologies and might later support near-field communication (NFC) capabilities, to allow offline money transfers between two digital wallets that were within proximity. 

US Federal Reserve Chairman Jerome Powell said last week the government agency would be more involved in cryptocurrencies and mooted creating its own digital currency in future. He added that the Federal Reserve would soon release a discussion paper that looked at the implications of digital payments, with “a particular focus on the possibility of issuing a US central bank digital currency”.

China’s threats of a potential crackdown, alongside Elon Musk’s detour on accepting Bitcoin as a payment option, led to a tumultuous week for the cryptocurrency. It shed more than 10% in value, dipping to its current hold at $35,598. 

RELATED COVERAGE