China may ban mining cryptocurrency

The Financial Times has at its disposal a document that demonstrates the attitude of the Chinese authorities to Bitcoin mining. As far as one can understand, the government is dissatisfied with the amount of electricity consumed in mining and the financial risks that are characteristic of a cryptocurrency market. Therefore, an interdepartmental working group was created, which directed the regional authorities to promote the termination of mining by local companies.



The working group includes representatives of the People’s Bank of China. Last year, China closed cryptoexchanges and banned local companies from conducting primary token allocation (ICO). Those who have already spent ICO were instructed to return the collected funds to investors and to stop working on their projects.



The group referred to above is called “Leading Group for Restructuring Financial Risks on the Internet.” It was formed in China in 2016. It is headed by the deputy head of the People’s Bank, Ban Gunshen.



By the way, there is really a lot of electricity spent on mining (mining) cryptocurrency. Thus, according to estimates of specialists from Digiconomist, around the world for this purpose about 0.17% of all electricity in the world is spent. At the same time, a very significant part of cryptocurrencies (especially Bitcoins) is mined in China. This country accounts for about three quarters of the total cryptomonet in the world.



The problem with miners for China is also relevant because very few of them register a legal entity. Basically, these are private entrepreneurs who build farms in regions where there are a lot of coal and hydroelectric power plants. In particular, this is Inner Mongolia, Sichuan, Yunnan and Xinjiang Uygur Autonomous Region. The country has strict rules regarding the consumption of electricity - end users are prohibited from buying it from producers, not from grid operators.



Officials believe that mining undermines the efforts of the authorities to combat activities that "diverge from the needs of the real economy." Local authorities are obliged to transfer to the center data on mining facilities in the regions under their control. In addition, they are required to show progress in the elimination of mining farms before the 10th day of each month.



It is clear that such strict measures regarding mining do not suit the miners themselves. And the Chinese, who are engaged in this field, are looking for various ways to transfer the generation of coins abroad. This is done either by transporting equipment, or by selling so-called competencies. For mining, countries with a cool climate, where there is not too expensive electricity, are optimally suited. And this is Canada, Iceland, Eastern Europe and Russia.



According to some representatives of the industry, China and so is not the most suitable region for mining. The main reason why miners are located here is the ability to quickly obtain computer parts needed to build farms. The corresponding infrastructure is well built here, so even a large data center can be built in a short time.



So far, there is no talk of a complete ban, although this possibility is not excluded. But there is considerable pressure on miners, which is explained by the authorities by the need to save energy and also to protect the environment. China is interested mainly in the development of robotics and artificial intelligence. The position of the authorities in relation to the miners shows that officials do not consider cryptocurrency an important technology that needs government support.



In addition to China, plans to ban cryptocurrency trading were also reported by the South Korean government. The Minister of Justice of this country Pak San Ki said that the government is preparing a document on the prohibition of transactions with virtual currencies on the Korean stock exchanges. After everything is ready, the police and tax authorities will make raids on Korean cryptocurrency exchangers due to alleged tax evasion.



All this was discussed by the Ministry of Justice with other ministries, in particular, finance. Various financial regulators also participated in the discussion. In order for the new bill to take effect, it must be approved by a majority of 297 members of parliament. Well, this is quite a difficult goal, so the bill can be discussed for several months in a row.