China's Proposal To Ban Cryptocurrency Mining Has Little To Do With Environment

[Hydrogen]

Recently, the National Development Reform Commission, China's top economic planning body, proposed banning all cryptocurrency miners within its borders. China has banned initial coin offerings since 2017 and made it harder for domestic citizens to transact on cryptocurrency exchanges by banning them domestically. It is clear that the Chinese state is not a fan of permissionless blockchains and cryptocurrencies built on top of them. The rationale was posted in a listed of industries the Commission was looking to eliminate because they seriously "wasted resources" or damaged the environment.

This has massive implications for the cryptocurrency ecosystem. Nature did an analysis that shows that three-quarters of cryptocurrency miners are based in China. With cheap computing power, hardware and reasonably cheap electricity and a strong pool of people who were incentivized by the level of profit that could be made, many of the miners who are dedicating their computing power to validating blocks on Bitcoin, Ethereum and other cryptocurrencies did most of their mining in China and were compliant with Chinese laws. Many miners have subsequently gone on to Iran and other jurisdictions, but found many of the same restraints that had led them to leave China, with their mining rigs banned at the border, or with unscrupulous players looking for a share of their profits.

Does any of this have much to do with the environment?

No, and a simple fact belies that truth.

While the Chinese state has made an effort to address environmental and energy concerns, tagging cryptocurrency mining as wasteful doesn't make sense when you consider the blockchain pilots the Chinese government is running as well.

The Central Bank in China (the PBOC or the People's Bank of China) is racing to do trials of its own version of centralized blockchain currency and has completed one already on a permissioned blockchain along with several other major commercial banks. The central bank was one of the first in 2014 to start unleashing pilot studies towards the first digital central currency and in 2016 put out a call for blockchain and cryptocurrency experts in order to learn more about the field. It's clear that the central bank in China (which unlike other many other central banks, is not nominally independent from political pressure) is moving to adopt blockchain in some capacity, and is at the forefront of monetary authorities studying blockchain.

The Communist Party of China doesn't think that blockchain and its useful properties (from traceability of transactions to immutability) are a waste or environmentally damaging when it comes under their control. It's not the technology that is being decried as wasteful, but rather the distribution of power from centralized state to decentralized miners.

In fact, it's not hard to see how a currency that traces every transaction throughout the country and is able to build a complex map of relationships between different people might then feed into the very many different ways the Chinese government traces data and uses it to rank its citizens: everything from the Social Credit score to facial recognition for jaywalking. The energy output of creating this massive ongoing surveillance apparatus much outweighs printing physical paper copies of currency once -- but it's not deemed useless because it is politically useful.

China has capital controls in place in order to keep the domestic currency (the Yuan) and domestic stock indexes stable. The country is also very watchful for economic elites trying to bring money out of the country, with 60% of them expressing an interest in emigrating out. It is of critical concern to the Chinese state to keep capital within its borders and in its control. In that respect, it can be easy to see how public, permissionless cryptocurrencies would counteract that goal.

The cryptocurrency mining ban China proposes has little to do with environmental waste: the surveillance system the Chinese state is trying to build on top of its every citizen, a system that seeks to ingest monetary information, transactions, and every communication would consume infinitely more power than their analog equivalents.

This move has much more to do with control: who has control over the blockchain in use and capital flows within and without China. Paradoxically, with the centralization of mining pools in China becoming a concern when it came to consolidation of network hash rate (60-70% of Bitcoin's network hash power was contained in China), China's proposed ban on cryptocurrency miners, if it comes to pass, may actually strengthen blockchains, Bitcoin and other cryptocurrencies in the long run.

https://www.forbes.com/sites/rogerhuang/2019/04/25/chinas-move-to-ban-cryptocurrency-mining-has-little-to-do-with-the-environment/

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What's the consensus on china's motivation for proposing to ban crypto mining?

Capital flight has always been a top candidate for china's crypto crackdowns. Preventing liquidity and wealthy residents contained inside china's borders from moving out of the country. Like china, both NY and california contain a high percentage of residents who wish to migrate out of state and live elsewhere--taking their wealth with them. In this we might draw parallels between them.

Environmental concern is a newer angle. China currently hosts 14 out of the top 30 most polluted cities on earth. Despite high pollution in parts of the country they continue to construct new coal power plants which will inevitably contribute to even greater quantities of pollution. Bitcoin mining being extremely mobile and often tapping underutilized and therefore: cheaper sources of electricity does somewhat rule out the climate change angle.

Do we have other prime candidates with potential to explain a motive behind this?

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[alyssa85]

What's the consensus on china's motivation for proposing to ban crypto mining?

Capital flight has always been a top candidate for china's crypto crackdowns. Preventing liquidity and wealthy residents contained inside china's borders from moving out of the country. Like china, both NY and california contain a high percentage of residents who wish to migrate out of state and live elsewhere--taking their wealth with them. In this we might draw parallels between them.

It's entirely about capital flight. As long as there are Chinese miners, there are people willing to sell bitcoins over-the-counter or in person to very rich Chinese people who want to get their money out of the country.

And as it's being done in person or over-the-counter, they can't trace it or track who is buying, especially if the buyer exchanges cash for their coins. The only way to stop it is to ban mining, so people within China don't have access to the coins at all.

[Genemind]

What's the consensus on china's motivation for proposing to ban crypto mining?

Capital flight has always been a top candidate for china's crypto crackdowns. Preventing liquidity and wealthy residents contained inside china's borders from moving out of the country. Like china, both NY and california contain a high percentage of residents who wish to migrate out of state and live elsewhere--taking their wealth with them. In this we might draw parallels between them.

It's entirely about capital flight. As long as there are Chinese miners, there are people willing to sell bitcoins over-the-counter or in person to very rich Chinese people who want to get their money out of the country.

And as it's being done in person or over-the-counter, they can't trace it or track who is buying, especially if the buyer exchanges cash for their coins. The only way to stop it is to ban mining, so people within China don't have access to the coins at all.

Totally agree, been reading a lot of articles about this and it seems the main reason for them banning crypto mining in their jurisdiction is because of this. They don't want their wealth going outside their country thru crypto-mining and over-the-counter transactions. Environmental issues has always been a minor issue to China. It will always be about wealth distribution.

[mu_enrico]

Yep, it is laughable for a country that produces most of its electricity from the dirty coal power. It never about the environment, but about capital flight. The Chinese government is known for facilitates capital inflows, and at the same time blocking the capital outflows.

[Haunebu]

Yep, it is laughable for a country that produces most of its electricity from the dirty coal power. It never about the environment, but about capital flight. The Chinese government is known for facilitates capital inflows, and at the same time blocking the capital outflows.

Absolutely ridiculous. Do these people even know how badly they are harming nature? They are one of the primary reasons behind global warming and yet all they care about is money and nothing else.

These governments need to get their shit together and understand that our planet is a billion times more valuable than money.

[Beerwizzard]

I've heard that chinese people when going abroad for some work to countries, where they can't use their local payment systems, are transfering money back to china in Bitcoins. So right now it seems like the system started to work in the opposite direction and wealthy people started to transfer their money out of the country.
The other point is that  China is authoritarian enough country in order not to hide their true goals.

[CryptoBry]

Yep, it is laughable for a country that produces most of its electricity from the dirty coal power. It never about the environment, but about capital flight. The Chinese government is known for facilitates capital inflows, and at the same time blocking the capital outflows.

Yes, the government is of course just using environmental concerns (which can be valid, anyway) to cover up the real reasons why finally they are acting against Bitcoin or cryptocurrency mining. This business is making money and the government can tax anybody doing business within its border. This has something to do with the fact that they don't have comfortable control within the industry most especially on the tracking of capital outflows or money going out of the money coming from this industry. Well, if there are doors shutting down there will certainly be new doors opening, so I am not worried about this development a tall...in fact this can be an opportunity just waiting to manifest itself.

[samcrypto]

I don’t believe on China anymore and they are just trying to control its people. Chinese government are just ruining the sea on the south China sea so how can they become an environmentalist when they have hidden agenda. There’s a big political on the bitcoin mining ban, they can’t play like this in long term.

[dothebeats]

With Shanghai and Beijing being included on the list of cities with the most CO2 in the air, I don't really think China is concerned with the environment being degraded by bitcoin mining but rather the losses their economy is getting from crypto gains produced by these miners. Some of the money that should be revolving around their economy is escaping by means of bitcoin, and that's not good news for the Chinese. Their stance on bitcoin mining is fueled and tainted with economic goals rather than to protect the environment which they are advocating.

[Spaffin]

In my opinion, the mining of bitcoins in China and environmental pollution have nothing in common with each other. At the very mining just heat is generated from the work of electronics. It is not so dangerous for our world even to discuss this topic. Large-scale solar panels are produced in China, so if you wish, you can resolve the issue of producing cheap solar energy. For this, China’s climate is very suitable. Therefore, the upcoming ban on mining Bitcoin is hardly relevant to environmental pollution.

[kryptqnick]

I think it was obvious from the very beginning that banning mining had little to do with environmental responsibility. China is one of the biggest polluters on Earth, and they never seemed to care about the consequences. Another area where China is one of the biggest is violating privacy of its citizens. China is the kind of country that likes to stay in control as much as possible, so it makes perfect sense that now they are trying to shut down mining of real cryptos, while working on a Blockchain they'd be able to control. Sad but true. I hope it won't affect the market much.

[traderethereum]

I am not sure that the Chinese government has a big concern for the environment in their country although they are saying about reducing the pollution in their country.
We need to wait for the next update from them so we can know what step they make regards to the bitcoin mining.
I don't know if there are any new candidates behind this because I am sure that they don't want to expose the news to public.

[justspare]

I don’t believe on China anymore and they are just trying to control its people. Chinese government are just ruining the sea on the south China sea so how can they become an environmentalist when they have hidden agenda. There’s a big political on the bitcoin mining ban, they can’t play like this in long term.

I also believe that whatever china is doing to ban cryptocurrency is political, because I read in news recently where they are supporting cryptocurrency program in Malaysia and here in their country, they are planning to ban it. Another thing I see is that, it might just be a threat and away to get attention of the miners to submit to them for regulation.

Government will never support whatever they will not benefit from, I am waiting for anther news very soon that will talk about the cancellation of the decision they have made to lift the ban. Crypto is very important to their economy and they would have also realized that they need it the most, so they will have no choice than to also embrace it.

[alisafidel58]

I believe that this proposal has really nothing to do with the issue of environmental policy or protection that bitcoin mining has been causing them or is there such environmental issue. The main problem here is that chinese government is hunting down there citizen who has been related to crypto and might hold a significant amount of money that they do not know of, which in result to this proposal banning of bitcoin and other cryptocurrencies.

[AjithBtc]

Yep, it is laughable for a country that produces most of its electricity from the dirty coal power. It never about the environment, but about capital flight. The Chinese government is known for facilitates capital inflows, and at the same time blocking the capital outflows.

Absolutely ridiculous. Do these people even know how badly they are harming nature? They are one of the primary reasons behind global warming and yet all they care about is money and nothing else.

These governments need to get their shit together and understand that our planet is a billion times more valuable than money.

The controversy will continue forever, it is all about the development, everyone won't be having the same thought process with global warming. Countries initially try to make money and are further focused on making the environment artificially same as few countries create artificial rain. China too seems to go with such a plan of destroying the nature and then make things artificially. Countries that have understood the value of planet have already begun to preserve nature.

[Kevin77]

It is a simple fact that they are afraid of the power bitcoin would have over their currency now that they managed to work decades to make it the strongest currency out there.

Dollar was the strongest currency for a while and it could still be said that its still the strongest one but china managed to make it their duty to take worlds all manufacturing into their own country and make it so cheap that there would be basically no more factories anywhere and whole world would have to pay them to get something done and that allowed them to get money from everywhere around the world making their own currency much much stronger.

If bitcoin and crypto becomes a world power that would result with Chinese currency losing value and china can't really afford that, it's that simple.

[finaleshot2016]

Yep, it is laughable for a country that produces most of its electricity from the dirty coal power. It never about the environment, but about capital flight. The Chinese government is known for facilitates capital inflows, and at the same time blocking the capital outflows.

Absolutely ridiculous. Do these people even know how badly they are harming nature? They are one of the primary reasons behind global warming and yet all they care about is money and nothing else.

These governments need to get their shit together and understand that our planet is a billion times more valuable than money.

They have the worst government, they prioritize money because they only know wealth as an important thing in life. They're good at business and stuffs about profits but their attitude was very wrong, they don't care about the others, money is only the thing.

Even our government, they're making it as the province of China because of money lending. There's a lot of business that runs with a Chinese in our capital city. They're making our country as a trash area and now my fellow citizen is getting angry with chinese people.

[Jating]

How ironic it is, they are one of the major contributor of environment hazards in the world and yet they trying to picture as their biggest concern and should be stop at all cost.

It's politically and socio-economic related, at least that's that way I see it. They don't want bitcoin to take over their economy and don't want to give their people more financial freedom and hide their wealth thru bitcoin.

[Adriano2010]

Indeed is ironic if they will stop mining, they are the lerger miners for now, and i think will not be so easy to replace all miners from China and this will take time but maybe they will change their mind and not ban mining.

[Ailmand]

Been hearing this controversy for such a long time and it's still not sure and clear that China will completely ban mining because they are still having operations at some point.
China has the biggest number of crypto users so they will always do something to pursue mining even if it's against the government.