Image Credits: Visual China Group (Image has been modified)
According to a leaked January 2 memo from the ‘Leading Group of Internet Financial Risks Remediation’ — the country’s internet finance regulator which initiated the clampdown on bitcoin — bitcoin miners should make an “orderly exit” from China because they have consumed “huge amounts of resources and stoked speculation of ‘virtual currencies.”
Details of the memo were posted on Twitter by Chinese blockchain industry executive Elly Zhang and confirmed by Quartz.
The group itself doesn’t control national energy usage but it is an influential political vehicle that’s led by the deputy governor of the People’s Bank of China (PBC), Pan Gongsheng. To remove miners, the group asked its local offices to look into policies around price, tax, land usage and environmental concerns.
Its local representatives must report back on their progress of removing miners in their region on a monthly basis, according to Quartz.
The situation is complicated by the fact that many miners, and particularly those in China, make use of cheap power, or flock to locations where there’s excess capacity. In some cases, mining businesses partner with local governments to ensure a steady supply of electricity at discounted rates, with a portion of the profits returned to the local authorities. That’s offered a welcome economic boost in regions where more traditional industries are struggling.
But there’s no smoke without fire. It certainly seems like central government has a plan to stamp out the miners. Beyond today’s news, both Bloomberg and Reuters last week reported on the PBC’s plans to slowly cut down on the number of miners. That, apparently, includes dissolving any such agreements and deals that had previously been struck.
Perhaps wary of additional regulation, China’s bitcoin mining giants have already branched out to open new facilities in countries like Iceland, Canada and the U.S. Nonetheless, a serious move to crush the mining industry has the potential to impact bitcoin.
Disclosure: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.