Despite the ban on mining, China’s bitcoin mining business continues to grow

As early as 2013, the People's Bank of China and other departments issued the "Notice on Preventing Bitcoin Risks", which clearly emphasized that Bitcoin is not a currency, but only a specific virtual commodity, which cannot be circulated in the currency market, and financial institutions are not allowed to conduct related business. In September last year, China banned ICO projects, followed by the closure of domestic digital currency exchanges and the prohibition of digital currency trading business. China has taken a series of measures to restrict Bitcoin trading activities.

According to a report by Nikkei Asian Review, although China has taken various measures to restrict Bitcoin transactions, Bitcoin mining operations are still in full swing in some of its remote areas.

For high-power miners, electricity costs are one of the important factors that must be considered. These remote areas with abundant electricity supply are undoubtedly the first choice for Bitcoin miners, including Sichuan Province and Qinghai Province, which are known as the Bitcoin mining capitals. According to foreign media reports, Sichuan Province has become the place where the world's Bitcoin mining capital is most concentrated.

Many Bitcoin miners have invested in setting up Bitcoin mines here. On the one hand, the economies of Sichuan and Qinghai provinces are heavily dependent on local tourism and resource mining, and the local governments want to introduce emerging industries to achieve a diversified economic landscape. For example, Qinghai Province plans to include digital currency in emerging industries that can boost the province's income. On the other hand, it is because of the abundant and cheap electricity resources here that continue to attract miners to invest in mining, as well as the low population density and cold climate, which have inherent advantages in solving the noise and heat dissipation problems of mining machines.

Geopolitical Purpose

While there have been reports that China is taking steps to severely restrict cryptocurrency mining, this goal has not been fully achieved. According to the Nikkei Asian Review, one of the reasons why the industry has not completely disappeared is that "China hopes to increase its influence on international financial liquidity." The United States has already gained this influence through the US dollar, and cryptocurrencies can play the same role for China.

It is estimated that China currently accounts for about 70% of the global cryptocurrency mining capacity. Brad Garlinghouse, CEO of Ripple, said in an interview with Stifel technical analyst Lee Simpson that "Bitcoin is completely controlled by China."

Economic stimulus for poor areas

Currently, China dominates global Bitcoin mining, partly because of its relatively cheap and abundant electricity supply. In addition to Sichuan and Qinghai provinces, regions such as Inner Mongolia and Xinjiang also have huge coal resources, and cryptocurrency mining is an opportunity to change their underdeveloped economic status quo. Therefore, whether it is the miners' cost requirements or the local economic development goals, it will be a win-win.

As the world's second-largest economy, China is also home to some of the world's leading digital currency mining hardware manufacturers, including Bitcoin mining giant Bitmain, which has built some large-scale mining facilities in Inner Mongolia, and the city of Ordos in Inner Mongolia sells electricity to Bitmain at $0.04 per kilowatt-hour, far lower than the price in other parts of the world.