China, home to the world’s biggest cryptocurrency mining farms, now wants to ban them completely

Bitcoin, the world’s most traded cryptocurrency, is now at around US$5,200, its highest level in four months

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An employee inspects machines for the production of bitcoin and lightcoins. Photo: AFP

Published: 1:03pm, 9 Apr 2019Updated: 10:42pm, 9 Apr 2019

China’s top economic planning body has proposed new rules that would see the closure of all local cryptocurrency mining facilities if enacted – a move that would potentially end the country’s dominance in the energy-hungry, yet lucrative industry.

The National Development and Reform Commission (NDRC) on Monday unveiled amendments to its guidance for adjustments to the nation’s industrial structure, including categories that are encouraged, restricted and eliminated. Cryptocurrency mining was included among sectors to be eliminated immediately. The new list is under public consultation until May 7.

The NDRC did not immediately respond to a request for comment sent via a message board on its website.

Cryptocurrency mining is the process of validating transactions in digital forms of money like bitcoin and ethereum in exchange for new coins given as a reward. The specialised computers used for the mining activity consume large amounts of electricity.

Industries in the eliminated category include those seen as wasting energy or polluting the environment, according to rules enacted by China’s cabinet in 2005. Investment and loans in those industries are banned. During the elimination period, authorities are allowed to raise electricity prices for relevant businesses to force them to close. The manufacturing, sale, and use of products in the eliminated categories are also prohibited.

China is home to some of the world’s largest cryptocurrency mining farms – data centres hosting the mining rigs – thanks to cheap electricity in the country’s coal-rich Xinjiang and Inner Mongolia regions. In recent months, Chinese miners are known to have deployed machines in the southern Yunnan and Sichuan provinces to take advantage of the even cheaper hydropower available there during the rainy season.