The first shot after 521: What information does Inner Mongolia's "new eight measures" to crack down on mining reveal?

Wu said author | Colin Wu

Editor of this issue | Colin Wu

On the evening of May 25, Inner Mongolia fired the first shot:

According to the official WeChat account of the Inner Mongolia Development and Reform Commission, it was proposed to strictly implement the "Inner Mongolia Autonomous Region's Several Guarantee Measures to Ensure the Completion of the "14th Five-Year Plan" Energy Consumption Dual Control Targets" in accordance with the deployment requirements of the 51st meeting of the Financial Stability and Development Committee of the State Council on cracking down on Bitcoin mining and trading behaviors, further clean up virtual currency "mining" behaviors, strengthen crackdowns and penalties, and build a long-term regulatory mechanism to maintain market order, the big data industry environment, and prevent financial risks. We organized the drafting of the "Inner Mongolia Autonomous Region Development and Reform Commission's Eight Measures on Resolutely Crackdown on and Punishment of Virtual Currency "Mining" Behaviors (Draft for Comments)" and are now soliciting public opinions.

How to interpret:

First, Inner Mongolia was the first to issue a document, which is related to its previous attitude towards cracking down on mining. Compared with the content issued by the Inner Mongolia Development and Reform Commission in February, it is obviously more detailed. Due to the great pressure of carbon neutrality and anti-corruption in the energy sector, Inner Mongolia is the most radical in cracking down on mining.

At that time, the content was only: "Virtual currency mining: Comprehensively clean up and shut down virtual currency mining projects, and withdraw all by the end of April 2021. Reasonably and orderly control the scale of data center construction, and strictly prohibit the construction of new virtual currency mining projects."

The requirements this time are basically within the existing legal system, and the restrictions on mining have reached the extreme. It even involves mining in Internet cafes and inclusion in the blacklist of dishonest people, which have never appeared before. However, there is really no law to follow for individual mining, so it is not involved.

Referring to Inner Mongolia’s plan to clear out cryptocurrency mining and its carbon neutrality commitment, what impact will it have on the mining industry?

Second: Inner Mongolia’s policy may mean that Beijing allows local governments and ministries to issue their own policies and implement them according to the situation, rather than the National Development and Reform Commission/Energy Bureau issuing orders, which may not be a bad thing, as well as the large number of citations to various laws in the content. However, the subsequent policies of the central bank, the Ministry of Public Security, Sichuan, and Xinjiang are more concerned.

At the central bank level, it is expected that it will not deviate from the content of the previous three associations: the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association's announcement on preventing the risk of speculation in virtual currency transactions. As Sichuan's flood season is approaching, water and power abandonment is serious. From the perspective of solving financial difficulties, absorbing abandoned power and promoting employment, local governments should be reluctant to immediately withdraw.

The other two have greater uncertainties. In particular, whether OTC will be severely cracked down is unknown at present. However, if there are new policies, the first thing to be affected may be the removal of OTC businesses from major exchanges. However, from another perspective, if the purpose is to crack down on currency-related fraud and gambling businesses, it may be more beneficial for the police to have the assistance of exchanges. After the cancellation of OTC, it will go underground, making it more difficult for the police to arrest them.

After the Inner Mongolia policy was released, the price of Bitcoin did not fluctuate, but this does not mean the end. On the one hand, it is because of the order-calling effect brought by Dalio, and on the other hand, the market has digested the 521 panic last weekend. But as mentioned earlier, the policies of the above four ministries and provinces will have a greater impact.

Third: It is certain that 521 has had a profound impact on China's mining industry. At least this year, the entire Chinese cryptocurrency industry will go overseas or go underground. It is a high probability event. It is reported that overseas mines have been in serious short supply recently. All Russian mines are full, and Kazakhstan's electricity prices have risen by 40%. An operator of an overseas mine said that no one was interested before, but the phone has been almost blown away in the past week.