China’s continued attack on the fledgling cryptocurrency sector has taken a fresh twist after an autonomous region synonymous with crypto mining banned the activity over energy concerns.
Inner Mongolia, one of the most economically developed provinces in China, has banned cryptocurrency mining and declared intentions to shut down all such activities as early as next month.
The fresh ban raises fears that the world’s second-largest economy, and an important player in the crypto landscape, will take more steps to outrightly eradicate bitcoin mining.
Cheap energy and bitcoin mining
Inner Mongolia has become a favorite region for cryptocurrency miners because of the availability of cheap power.
Bitcoin mining is an energy-intensive process and miners generally choose to set up their mining farms in cool regions with cheap electricity.
Inner Mongolia, surrounded by large coal mines and known for its cheap electricity, has attracted investment from power-intensive industries like aluminum smelting, and more recently, bitcoin mining.
According to the Bitcoin Electricity Consumption Index compiled by Cambridge University, Inner Mongolia accounts for 8% of bitcoin’s global computing power.
China contributes more than 65% of the network’s total computing power due to factors such as cheap labor and electricity as well as being home to a number of bitcoin mining chipmakers.
The leading manufacturers – Bitmain, Canaan, and Ebang – of bitcoin mining equipment are based in China.
Shocking the industry
Inner Mongolia made the decision after it was blasted by the country’s top economic planner – the National Development and Reform Commission – for being the only province that failed to put its energy consumption under control in 2019.
The cryptocurrency space has been unnerved by the latest developments, which have long been China’s stance on the cryptocurrency industry.
The Asian country has adopted a hostile stance against the cryptocurrency industry due to concerns of fraud, energy waste, and speculation.
China first made proposals to discourage crypto mining in 2018 but did not immediately act on it. It seems that the past is catching up and will likely invoke the memories of 2017.
China clamps down on crypto
In 2017, China abolished initial coin offerings (ICOs) at a time when the crowdfunding method was at its peak.
The country further clamped down on cryptocurrency exchanges and trading, forcing blockchain startups to set up shops abroad.