Today, Crypto Twitter influencers and media began circulating rumors that China was regretting its crackdown on crypto after surged to new all-time-highs in the past week. As has been well documented, China’s Bitcoin mining ban caused an exodus of miners out of China, which once controlled more than 50% of Bitcoin's global Bitcoin hashrate.
Those of us from China, who know how the country's government operates, are highly skeptical—and not just because we haven't seen any serious media coverage of this.
But it's still interesting to look at how this misunderstanding arose.
— Zhu Su 🔺 (@zhusu) October 25, 2021
The rumor likely came into being for two reasons. First, on October 21, China's National Development and Reform Commission stated that it would add "virtual currency mining” to its list of eliminated industries after it solicits public opinions; when an industry is added to the list, it effectively ceases to exist within mainland China.
While the National Development and Reform Commission of China seems a little out of place in the country's current market economy, its word remains binding.
The commission first floated virtual currency mining for the list in 2019, but after soliciting opinion, the industry was taken off the final announced list. Therefore, some people think that public opinion could save the industry again.
But this is impossible. In 2020, China made a global commitment to carbon neutrality, and Chinese policymakers believe that Bitcoin mining wastes energy and undermines its climate efforts, one of its biggest policy priorities. The political pressure on Bitcoin mining was much smaller in 2019, when public opinion averted a crackdown, than it is in 2021. And it was a small number of miners in 2019 who succeeded in lobbying the government; broader public opinion in China is actually opposed to Bitcoin mining because it doesn't create jobs and miners don't pay taxes.
We don't know for sure, but the likelihood is very low. It can also be interpreted from another angle: Some Chinese government officials may think that more Bitcoin mining will disrupt America’s carbon neutrality and disrupt its financial order. Thus the amplification of this news could just be a form of gloating. Moreover, this news could simply be taken by Chinese government higher-ups to mean that the country has successfully completed the task of combating Bitcoin mining.
Putting aside these misunderstandings, what is the real status of crypto mining in China now? I have to say: it’s very strict.
Inspections have filtered all the way down to small local governments, which are using network technology to find mining IPs. A large number of mining companies have dissolved and almost all of them, including those centered around Filecoin, are moving out of China. And while research and development of Bitcoin mining chips and machines remains in China for the time being, Bitmain has announced that it will not ship to Chinese users.
In short, Bitcoin mining has become the enemy of carbon neutrality in China's eyes. Just look at a new report from China’s highest-level official economic media that states: “Bitcoin mining has high energy consumption, high pollution, high harm, and low output. It will only compete for precious power and waste huge resources.”
It’s clear that China's Bitcoin mining industry, which once dominated the world, is about to totally withdraw from the market, and it's hard to imagine its return in the foreseeable future.