The Chinese government is reportedly concerned about the energy consumption of Bitcoin mining in the country causing alarms that the future might bring stricter supervision of crypto mining operations.
Data centres under scrutiny
Beijing, the Chinese capital started conducting a check on data centres dealing with crypto mining in an aim to understand their impact on energy consumption. The emergency notice sent by Beijing Municipal Bureau of Economy and Information Technology on Apr. 27 required the data centre operators involved in crypto mining to report and share the amount of power consumed by the activity.
Chinese columnist Colin Wu, popularly referred to as Wu Blockchain on Twitter quickly downplayed the fears sparked by this notice on how it could impact Chinese Bitcoin miners in the short term. Wu noted that though the announcement caused panic in China, data centres are difficult to use for Bitcoin mining hence they are mainly used for ETH Filecoin.
This caused some panic in China. However, the Chinese government said it was only conducting an investigation. Data centers are difficult to use for Bitcoin mining, and are mainly used for ETH Filecoin.
— Wu Blockchain (@WuBlockchain) April 29, 2021
Information accessed via translation from Chinese state media shows that the emergency notice was a routine work for the Beijing Municipal Bureau of Economy and Information Technology, which seeks a clearer account of the energy consumption from the mining operations of data centres in Beijing.
As of now, it has not been confirmed whether the checks will be carried out on a national scale or the possible implications in future. Though, according to PengPai, Yu Jianing, the rotating chairman of the Blockchain Committee of the China Communications Industry Association, the notice is a sign of things to come. He said that under the background of carbon neutrality, the future blockchain mining will indeed have stricter supervision.
Previous bans on crypto mining
The notion of stricter supervision might be true especially when looking at Inner Mongolia, which will no longer be a mining hub. Crypto miners have until the end of April to shut down their operations since China banned crypto mining in the area in a bid meet its new carbon-reduction goals.
According to China’s 14th five-year plan, there are targets including an 18% reduction on CO2 intensity as well as a 13.5% reduction on energy intensity for the 2021-2025 period.
Beijing is not among the crypto mining hubs since its electricity prices are higher than other regions. Therefore, other hubs like Xianjiang and Sichuan are the future targets.
Cambridge Bitcoin Energy Consumption Index (CBECI) data estimates that in April, Xianjiang accounted for 35% of China’s Bitcoin hashing power and roughly 23% of the world’s hash rate.
Effects of stringent mining conditions
If more stringent measures are put on Bitcoin mining, there will be global effects. Some people believe that the power outages around Apr. 17 that caused Xianjiang’s drop in hash rate might have contributed to Bitcoin’s sharp crash to $50,000 earlier in the month.
9000 BTC was sent into Binance, read that as a sell off of those coins.
I'd note that Binance serves volume from Asia more than the West. It's likely this was sent in from a whale with closer knowledge to happenings in China. pic.twitter.com/iRePS83Blw
— Willy Woo (@woonomic) April 18, 2021
According to Willy Woo, a crypto analyst, a whale with closer knowledge to happenings in China sold off before mining pools were temporarily shut down. Woo said that a transfer of 9,000 BTC was made to Binance on Apr. 16.
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